Question

Federal Reserve policy changes the:

a) money demand curve.
b) transactions demand for money.
c) precautionary demand for money.
d) money supply curve.

Answer 1

Federal Reserve policy changes the money supply curve through expansionary or contractionary monetary policy.

Step-by-step explanation:

Federal Reserve policy changes the money supply curve. When the Fed conducts expansionary monetary policy, it buys bonds and increases the money supply, which shifts the money supply curve to the right. Conversely, when the Fed conducts contractionary monetary policy, it sells bonds, decreases the money supply, and shifts the money supply curve to the left.