ECO 372 Week 3 Discussion Question 3 - 90396

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What happens to the money supply, interest rates, and the economy if the Federal Reserve is a net seller of government bonds? What happens to the money supply, interest rates, and the economy if the Federal Reserve is a net buyer of government bonds. Why would the government implement a stimulus program into the economy? The Federal Reserve has a major tool that they can use to manipulate money supply, interest rates, and the economy it is called open market operations. Open market operations involve the Fed buying and or selling treasury bonds in the open market. When the Fed buys bonds in the open market the money supply is increased because bonds are exchanged for cash, prices rise thus causing interest rates to decrease. When the Fed sells bonds in the open market money supply is decreased because money is being removed from the economy in exchange for bonds, prices drop and interest rates rise...
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What happens to the money supply, interest rates, and the economy if the Federal Reserve is a net seller of government bonds? What happens to the money supp

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