Question

   Open market purchases of government bonds by the Fed eventually
   a.   

encourage tax increases
   b.   

increase real GDP
   c.   

lead to open market sales of bonds
   d.   

reduce the pressures on bond markets
   e.   

increase the interest rate

Question 48

An individual's quantity of money demanded is defined as
   a.   

the total amount the individual decides to hold in cash, bonds, and other assets, at each possible interest rate
   b.   

the amount of income that the individual chooses to hold in the form of money, at each possible interest rate
   c.   

the individual's desire to have greater financial wealth
   d.   

the percentage of each dollar of income that the individual wishes to spend
   e.   

the amount of wealth that the individual chooses to hold as money, rather than as other assets

Answer 1

47. Option B.

• The open market purchase of government bonds is known as expansionary monetary policy.
• When fed purchases government bonds from open markets, the money supply and the inflation rate increases within the economy.
• This will eventually Increase the real GDP within the economy.

48. Option E.

• An individual's quantity of money demanded is defined as the amount of wealth that the individual chooses to hold as money, rather than as other assets.
• When an individual demands any certain amount of money, it show's how he or she desires to hold in hand in accordance with the interest rate.