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

Question

Quizplus · Accepted Answer

If the Federal Reserve conducts open market purchases, it is injecting more cash into the market which results in an increased money supply. This shift of the money supply curve to the right causes the LM curve to shift to the right, increasing both income and the interest rate. Therefore, the correct answer is (C) purchases; increases.

If the Federal Reserve Conducts Open Market ________,The Money Supply