What do the buying and selling of government bonds do to inflation?
If the Fed were to buy a government bond, would inflation go up or down?
If the Fed were to sell a government bond, would inflation go up or down?
Please include explanations as to why inflation goes up or down.
Thank you! :-)
Bond best answer:
Answer by Ted
When the Fed buys bonds, it's payment increases the money supply, which increases inflation. Opposite for selling bonds.
Inflation comes from the amount of money in circulation being more than is needed to support a given level of economic activity. It is a combination of everything, so it's difficult to calculate. Economic activity includes all labor, production of goods, and investment.
Bond
PJ Bond @ Fest 10 - 10.28.11-41
Image by elawgrrl
PJ Bond plays the Civic Media Center for Fest 10, Gainesville, FL, October 28, 2011.
Note: Please share, download and use these photos for non-commercial purposes but be sure to abide by the creative commons license by crediting the photos to Nicole Kibert / www.elawgrrl.com and if using online, add a link back to this page or to www.elawgrrl.com. This license does not permit commercial use without my permission. Thanks.
Orignal From: What do the buying and selling of government bonds do to inflation? and PJ Bond @ Fest 10 - 10.28.11-41
No comments:
Post a Comment