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Author Question: When the Fed buys a government security, what happens to the monetary base and the quantity of ... (Read 77 times)

altibaby

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on: Jun 29, 2018
When the Fed buys a government security, what happens to the monetary base and the quantity of money? Which changes by more or do both change by the same amount?
 
  What will be an ideal response?

Question 2

What is demand-pull inflation?
 
  What will be an ideal response?


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orangecrush

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Reply #1 on: Jun 29, 2018
Answer to Question 1

When the Fed buys a government security, both the monetary base and the quantity of money increase. As reflected by the money multiplier, the increase in the quantity of money exceeds the increase in the monetary base.

Answer to Question 2

An inflation that starts from an initial increase in aggregate demand is a demand-pull inflation.


altibaby

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Reply 2 on: Jun 29, 2018
Gracias!

momolu

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

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