Which of the following increases the quantity of money?

Question

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When the Fed purchases a government security, they pay for it by creating new money, thereby increasing the quantity of money in circulation. A is incorrect because an increase in the government's budget deficit does not necessarily increase the quantity of money in circulation. C is incorrect because the withdrawal of cash from a bank reduces the quantity of money in circulation. D is incorrect because the purchase of a government security from the Fed does not increase the quantity of money in circulation.

Which of the Following Increases the Quantity of Money