Figure 14.1
-Refer to Figure 14.1.Suppose the Federal Reserve buys bonds in the open market.The money supply will _______ and cause a shift from ______.

Question

Figure 14.1 
-Refer to Figure 14.1.Suppose the Federal Reserve buys bonds in the open market.The money supply will _______ and cause a shift from ______.

Quizplus · Accepted Answer

When the Federal Reserve buys bonds in the open market, the money supply will increase. This will cause a shift from the current aggregate demand and supply equilibrium point AD₁ to a new point AD₂, where both aggregate demand and supply curves have shifted to the right.

Figure 14.1 -Refer to Figure 14.1.Suppose the Federal Reserve Buys Bonds in Buys