help!! If the Federal Reserve sells $40,000 in Treasury bonds to a bank at 5% interest, what is the immediate effect on the money supply?
A.It is decreased by $40,000.
B.It is increased by $40,000.
C.It is increased by $42,000.
D.It is decreased by $42,000.

Question

help!! If the Federal Reserve sells $40,000 in Treasury bonds to a bank at 5% interest, what is the immediate effect on the money supply? 
A.It is decreased by $40,000. 
B.It is increased by $40,000. 
C.It is increased by $42,000. 
D.It is decreased by $42,000.

anonymous · Answer

@Mertsj is it D. ?!

mertsj · Answer

I don't know.  Sorry.  I would have thought the money supply would have been increased because the fed interjected money into the banking system ut I really don't know.

anonymous · Answer

Whose money supply are they talking about?