Question

If the Fed begins to buy treasury bills to counter a recession, we would expect to see

A. an increase in the demand for money.

B. a decrease in the demand for money

C. an increase in the quantity of money demanded.

D. a decrease in the quantity demanded of money,

E. no change in the demand for money.

Answer 1

Answer: A

Explanation:There will be no change in the demand for money. Instead, this will lead to a money supply increase, because of a chain effect that leads to excess reserve increases, which then lead to interest rates falling and an increase in the money supply.