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what happens to interest rates and supply curve of loanable funds if the fed enages in an open market purchase
Fed engages in open market operation purchase me and that Fed will buy securities from the market in order to infuse liquidity in the market.
When government starts to buy government securities from the market then money supply in the economy will increase and interest rates will decrease.
The supply curve of loanable funds represents the behavior of all of the savers in an economy. When interest rates are higher than savers will induce them to save more which will increase supply of loanable funds in the market.
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