Federal reserve buys some government bonds

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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

Reference no: EM13885585

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