Which of the following is true with regard to the supply of money?
A)an open market purchase of government securities will increase liquidity
B)an open market sale of government securities will decrease liquidity
C)liquidity and the money supply are directly related
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

A) An open market purchase of government securities injects money into the economy, thereby increasing the liquidity of the financial system.
B) An open market sale of government securities withdraws money from the economy, thereby decreasing the liquidity of the financial system.
C) Liquidity and the money supply have a positive correlation since an increase in the money supply leads to a corresponding increase in liquidity. Therefore, all the options are correct.

Which of the Following Is True with Regard to the Supply