Question

Suppose that the reserve requirement is 10% and that the Federal Reserve purchases $5 billion in bonds from a brokerage firm.Initially, as a result of this bond purchase, the money supply will___________

Answer 1

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Answer 2

Answer:

Increase

Explanation: Money supply is a term used to describe the amount of money available for use within an economy or the amount of money released into an economy by Government agencies and privates Organisations or Individuals.

Money supply can be increased through several means which includes through investment,through the purchase of stocks,bonds or other marketable securities.

Initially, as a result of this bond purchase, the money supply will increase as more money is being released for the purchase of stocks.