When the market for money is drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis, if the Federal Reserve buys bonds, then the money supply curve
A)shifts rightward, causing the value of money measured in terms of goods and services to rise.
B)shifts rightward, causing the value of money measured in terms of goods and services to fall.
C)shifts leftward, causing the value of money measured in terms of goods and services to rise.
D)shifts leftward, causing the value of money measured in terms of goods and services to fall.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys bonds, it increases the money supply by injecting more money into the economy, which shifts the money supply curve rightward. This increase in the money supply typically reduces the value of money in terms of goods and services, leading to a decrease in purchasing power or what each unit of currency can buy.

When the Market for Money Is Drawn with the Value