If the money supply in the economy were at MS3, to engage in expansionary policy the Federal Reserve Bank would use open market operation to move money supply to:

Question

Quizplus · Accepted Answer

If the Federal Reserve wants to engage in expansionary policy to stimulate economic growth, it needs to increase the money supply. Since the economy is already at MS3, which is above the desired level, the Fed needs to increase it further to achieve the expansionary policy. Therefore, it should move the money supply to MS4, which represents a higher level of money supply than MS3. This can be achieved through open market operations (OMO), which involve buying government securities, injecting money into the economy, and increasing the money supply.

If the Money Supply in the Economy Were at MS3