Which of the following is correct?
A)If the Fed purchases bonds in the open market,then the money supply curve shifts right.A change in the price level does not shift the money supply curve.
B)If the Fed sells bonds in the open market,then the money supply curve shifts right.A change in the price level does not shift the money supply curve.
C)If the Fed purchases bonds,then the money supply curve shifts right.An increase in the price level shifts the money supply curve right.
D)If the Fed sells bonds,then the money supply curve shifts right.A decrease in the price level shifts the money supply curve right.

Question

Quizplus · Accepted Answer

When the Fed purchases bonds in the open market, it increases the money supply, shifting the money supply curve to the right. A change in price level would not affect the money supply curve itself, but rather would cause a movement along the curve.

Which of the Following Is Correct