Question

10.Which of the following statements is (are) correct?

A.The Fed selling bonds in the open market would shift money supply right ward

B.An increase in the value of money (1/P) would shift money supply rightward.

C.The Fed selling bonds in the open market would cause the value of money to decrease.

D.All of the above

E.None of the above

11.The central bank in the U.S increased the money supply in the latter part of the first decade of the 2000s in response to a recession caused by a partial collapse of the banking and housing markets. The central bank might have done this by

A.selling bonds on the open market, which would have raised the value of money.

B.purchasing bonds on the open market, which would have raised the value of money.

C.selling bonds on the open market, which would have lowered the value of money.

D.purchasing bonds on the open market, which would have lowered the value of money.

E.increasing the reserve requirement, which would have increased the value of money

Answer 1

a) "E"

none of the above is correct, as to increase the money supply in the market the Fed would buy bonds from the market. an increase in the value will shift the money supply curve to the left and selling bonds would increase the value for money.

b) "D"

the Central bank did this by purchasing bonds in the market that lowered the value for money in the market.