Question

When everyone correctly anticipates that the Fed will buy government securities, then they know that prices will increase. Which of the following adjustments is not likely to occur?
A. Workers will negotiate higher wages.
B. Suppliers of resources will demand higher prices for their resources.
C. Producers will prevent the price level from increasing and hurting their sales.
D. Producers will raise prices.

Answer 1

Answer:

C. Producers will prevent the price level from increasing and hurting their sales.

Explanation:

When the FED buys securities from the public, the money supply increases and this raises the general price levels.

When general price level increases, workers would demand higher wages and the prices of goods and services would rise.

I hope my answer helps you