When the Fed purchases $200 worth of government bonds from the public,the U.S.money supply eventually increases by

Question

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When the Fed purchases $200 worth of government bonds, the sellers will have $200 more in their bank accounts, and they can use that money to make purchases or make deposits in other banks. This leads to a multiplication effect where the initial $200 increases the money supply by a multiple provided by the reserve requirement and the money multiplier. Therefore, the money supply eventually increases by more than $200.

When the Fed Purchases $200 Worth of Government Bonds from the Public,the