The Federal Reserve has just purchased bonds in the market,carrying out open market operations.In the short run in the Keynesian model,this would cause the foreign real interest rate to ________ and foreign output to ________.

Question

Quizplus · Accepted Answer

The purchase of bonds by the Federal Reserve increases the money supply, which leads to a decrease in the domestic real interest rate. This, in turn, leads to an increase in foreign real interest rates and an increase in foreign output.

The Federal Reserve Has Just Purchased Bonds in the Market,carrying