When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve buys bonds,then the money supply curve

Question

Quizplus · Accepted Answer

When the Federal Reserve buys bonds, it increases the reserves of banks, allowing them to lend more money. This increases the supply of money in the economy, causing the money supply curve to shift rightward. An increase in the money supply leads to a decrease in interest rates, which makes borrowing cheaper and encourages spending. This increased spending leads to an increase in aggregate demand, which exerts inflationary pressure on the economy and causes the price level to rise.

When the Money Market Is Drawn with the Value of Money