If the Fed makes an open market of securities, in the quantity theory M and V________
A) sale; decreases; does not change
B) purchase; does not change; does not change
C) purchase; increases; increases
D) sale; increases; decreases

Question

Quizplus · Accepted Answer

When the Fed sells securities, it decreases the money supply (M) as it takes money out of circulation, while the velocity of money (V) typically does not change immediately as it is more influenced by broader economic factors.

If the Fed Makes an Open Market of Securities, in the Quantity