Suppose the Fed decided to purchase $100 billion worth of government securities in the open market. Assume all payments are directly deposited into or withdrawn from the banking system. What impact would this action have on the economy? Specifically, answer the following questions.
How will M1 be affected initially?
a. No initial change to M1
b. Increase by $100 billion
c. Decrease by $100 billion
d. Not enough information to answer