Open market purchases raise the ________ thereby raising the ________.

Question

Quizplus · Accepted Answer

Open market purchases involve the Federal Reserve buying bonds, which increases the monetary base. The monetary base is one component of the money supply, so an increase in the monetary base will lead to an increase in the money supply through the money multiplier effect. Therefore, choice C is correct as it correctly identifies the relationship between open market purchases, the monetary base, and the money supply.

Open Market Purchases Raise the ________ Thereby Raising the ________

Open Market Purchases Raise the Thereby Raising the