QuestionJuly 20, 2025

What is the fed creating a lot more bank reserves by buying government securities in open market operations likely to do to inflation and inflation expectations? Inflation and inflation expectations will go to zero. They will stay the same. Lower Them. Raise them.

What is the fed creating a lot more bank reserves by buying government securities in open market operations likely to do to inflation and inflation expectations? Inflation and inflation expectations will go to zero. They will stay the same. Lower Them. Raise them.
What is the fed creating a lot more bank reserves by buying government securities in open
market operations likely to do to inflation and inflation expectations?
Inflation and inflation expectations will go to zero.
They will stay the same.
Lower Them.
Raise them.

Solution
4.3(346 votes)

Answer

Raise them. Explanation 1. Understand Open Market Operations When the Fed buys government securities, it increases bank reserves. 2. Analyze Impact on Inflation More bank reserves typically lead to more lending and spending, increasing demand. 3. Determine Effect on Inflation Expectations Increased demand can raise inflation expectations as prices may rise.

Explanation

1. Understand Open Market Operations<br /> When the Fed buys government securities, it increases bank reserves.<br />2. Analyze Impact on Inflation<br /> More bank reserves typically lead to more lending and spending, increasing demand.<br />3. Determine Effect on Inflation Expectations<br /> Increased demand can raise inflation expectations as prices may rise.
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