Central Bank wants to increase the money supply to the economy. Then: a) It will buy...
Central Bank wants to increase the money supply to the economy. Then:
a) It will buy bonds from the market
b) It will sell bonds in the market
c) It will increase the interest rate
d) (a) and (c)
e) (b) and (c)
Homework Answers
The correct answer is 'Option A'.
If the central bank wants to increase the supply of money in the economy then it will buy bonds from the market because of which the bonds will be exchanged for cash causing an increase in the supply of money in the economy. Increase in interest rate will not increase the money supply. So, the correct answer is 'Option A'.
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