In the short run, when the Fed increases the quantity of money
A) bond prices rise and the interest rate falls.
B) bond prices fall and the interest rate rises.
C) the demand for money increases.
D) the supply of money curve shifts leftward.

Question

Quizplus · Accepted Answer

When the Fed increases the quantity of money, it injects more money into the economy, which typically leads to lower interest rates as there is more money available for lending. Lower interest rates make existing bonds with higher interest rates more valuable, hence bond prices rise.

In the Short Run, When the Fed Increases the Quantity