Question

Suppose the Federal Reserve implements an expansionary monetary policy by buying bonds through open-market operations. Assume that this policy is unanticipated.

Answer 1

Decline in economic growth, and increase in inflation

Step-by-step explanation:

Feds apply expansionary monetary policy to increase the economic growth of a country. When feds purchase bonds through open market operations, it leads to increase in money supply in the economy. When the policy is unanticipated it leads to increase in the overall prices of goods and services. Increase in inflation can negatively effect the economy by deceasing the economic growth, and employment.