Actions Of The Government And The Increase In Prices

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The first step in this option is for the Federal Reserve to start to purchase bonds from consumers. As the Federal Reserve begins to buy these bonds back the bond prices are increased to make the selling of these bonds more attractive to consumers...
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When the Federal Reserve purchases a bond from a consumer a check is issued to the seller for the agreed price. This higher bond prices also lowers interest rates. The seller then deposits this check into his/her bank. This action increases deposits in the bank, which in turn raises the banks reserves to increase...
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