An open-market purchase
A)increases the number of dollars and the number of bonds in the hands of the public.
B)increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
C)decreases the number of dollars and the number of bonds in the hands of the public.
D)decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.

Question

Quizplus · Accepted Answer

An open-market purchase by the central bank involves the purchase of bonds from the public using newly created money. This increases the number of dollars in the hands of the public while decreasing the number of bonds in the hands of the public. Therefore, option B is correct.

An Open-Market Purchase