If the Fed decides to increase the money supply by $200 million, it can buy government bonds in the open market for less than $200 million.

Question

Quizplus · Accepted Answer

The Fed can buy government bonds in the open market for less than $200 million as it is not required to spend the full amount to increase the money supply. The actual amount will depend on the current market conditions and the Fed's desired impact on the economy.

If the Fed Decides to Increase the Money Supply by $200