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Question
Macroeconomics
Posted 3 months ago
Which of the following would be the FIRST change to occur when a central bank conducts open market purchases of bonds?

Choose 1 answer:
(A) The money supply increases
(B) The monetary supply decreases
(C) The interest rate decreases
(D) Aggregate demand increases
(E) Bank reserves increase
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Answer from Sia
Posted 3 months ago
E
Key Concept
Open Market Operations
Explanation
When a central bank conducts open market purchases of bonds, it buys bonds from the banks, which increases the banks' reserves immediately. This is the first change that occurs before any subsequent effects on the money supply, interest rates, or aggregate demand.

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