Question

State whether the following statements are TRUE or FALSE. Briefly explain your answer. a. When the...

State whether the following statements are TRUE or FALSE. Briefly explain your answer.

a. When the Federal Reserve conducts an open sale of government bonds, the federal funds rate will fall.

b. An expansionary monetary policy does not lead to an increase in output in the short run.

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Answer #1

1- when the federal reserve conduct an open sale of government bonds then money supply will reduce and if the money supply decreases then federal fund rate increases.

So above statement is false.

2-Expansionary monetary policy is used to increased the money supply and if the money supply increases then people have more money and so demand is created and then investment increases and production increases which leads to increase the output in the short run.

So above statement is false

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