When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve buys bonds,then the money supply curve
A)shifts rightward,causing the value of money measured in terms of goods and services to rise.
B)shifts rightward,causing the value of money measured in terms of goods and services to fall.
C)shifts leftward,causing the value of money measured in terms of goods and services to rise.
D)shifts leftward,causing the value of money measured in terms of goods and services to fall.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys bonds, it increases the reserves of banks, which in turn leads to an increase in the supply of money. This shift in the money supply curve to the right causes the value of money (price level) in terms of goods and services to fall. This is because with more money in circulation, individuals and businesses have more purchasing power, leading to an increase in demand for goods and services and consequently causing the price level to rise.

When the Money Market Is Drawn with the Value of Money