Equilibrium exists where the price level is 1.25 and the money supply equals 21

Question

Equilibrium exists where the price level is 1.25 and the money supply equals 21 billion. What is a new possible equilibrium when the Federal Reserve buys some government bonds?

Equilibrium exists where the price level is 1.25 and the money supply equals 21 billion. What is a new possible equilibrium when the Federal Reserve buys some government bonds?

A. price level = 1.25, money supply = 21 billion B. price level = 4, money supply = 21 billion C. price level = 9, money supply = 25 billion D. price level = 2, money supply = 25 billion

Explanation / Answer

D) price level = 2, money supply = 25 billion

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