If the Federal Reserve conducts open market purchases,the money supply ________,shifting the LM curve to the ________,everything else held constant.
A)decreases;right
B)decreases;left
C)increases;right
D)increases;left

Question

Quizplus · Accepted Answer

Open market purchases involve the Fed buying government bonds from banks, which increases the money supply. This increases the supply of loanable funds, causing the interest rate to decrease and shifting the LM curve to the right. Therefore, the correct choice is (C) increases; right.

If the Federal Reserve Conducts Open Market Purchases,the Money Supply