If the Fed Responds to an Increase in Aggregate Demand

question 180

Multiple Choice

If the Fed responds to an increase in aggregate demand by increasing the quantity of money

• A) nothing happens because aggregate demand had already increased.
• B) output will begin to decrease more rapidly than in the case in which only the first increase in aggregate demand happened.
• C) money wage rates will fall to reduce unemployment.
• D) there will be continued inflation.