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money supply

How does the Fed change the money supply with an open market purchase of the treasury securities. If it purchases $ 1Million, how much does the money supply increase?

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When the open market operation (OMO) purchase is made, the FED will credit that dealer's reserve deposits with the sale price of the bond (let's say $1 million). The FED will receive the IOU (i.e., bond certificate) in exchange. The money used by the FED to ...

Solution Summary

How does the Fed change the money supply with an open market purchase of the treasury securities. If it purchases $ 1Million, how much does the money supply increase?

$2.19