Question

2.FED (Federal Reserve Bank). buys a $10,000 bond from bank. What is the potential impact on MS (Money Supply)

Answer 1

Answer: Money Supply Increases

Step-by-step explanation:

If the FED buys a $10,000 bond from a bank, it is increasing the money supply in the economy because the cash that it pays for the bond will go into the economy.

Buying bonds and securities from banks is one way the FED can embark on expansionary monetary supply policies that aim to inject money into the economy.