Suppose the Fed purchases Treasury Securities.Interest rates in the United States will ________ and the U.S.dollar will ________ against foreign currencies.
A)decrease; appreciate
B)decrease; depreciate
C)increase; depreciate
D)increase; appreciate

Question

Quizplus · Accepted Answer

When the Fed purchases Treasury Securities, it increases the money supply in the economy, leading to a decrease in interest rates. This decrease in interest rates makes investing in the US less attractive, causing a decrease in demand for the US dollar, and a subsequent depreciation of the currency against foreign currencies.

Suppose the Fed Purchases Treasury Securities