When the Fed purchases U.S.government securities through the open market,the money supply:
A)increases,the interest rate falls,and the quantity of money demanded increases.
B)falls,the interest rate falls,and the quantity of money demanded increases.
C)increases,the interest rate increases,and the quantity of money demanded increases.
D)falls,the interest rate increases,and the quantity of money demanded falls.
E)falls,the interest rate falls,and the quantity of money demanded falls.

Question

Quizplus · Accepted Answer

When the Fed purchases U.S. government securities through the open market, it injects new money into the banking system, increasing the money supply. This results in a decrease in interest rates as there is more money available to lend out. The lower interest rates motivate individuals and businesses to borrow more, increasing the quantity of money demanded.

When the Fed Purchases U