If the Federal Reserve increases the money supply,then initially there is a
A)shortage in the money market,so people will want to sell bonds.
B)shortage in the money market,so people will want to buy bonds.
C)surplus in the money market,so people will want to sell bonds.
D)surplus in the money market,so people will want to buy bonds.

Question

Quizplus · Accepted Answer

When the Federal Reserve increases the money supply, there will be a surplus in the money market because there are now more dollars available. As a result, people will want to invest their excess dollars and buy bonds, leading to an increase in bond demand and a decrease in interest rates. This in turn stimulates economic activity and helps to boost borrowing and spending.

If the Federal Reserve Increases the Money Supply,then Initially There