When the Fed Unexpectedly Increases the Money Supply, It Will

question 40

Multiple Choice

When the Fed unexpectedly increases the money supply, it will cause an increase in aggregate demand because

• A) real interest rates will fall, stimulating business investment and consumer purchases.
• B) the dollar will appreciate on the foreign exchange market, leading to a decrease in net exports.
• C) lower interest rates will tend to decrease asset prices (for example, stock prices), which decreases wealth and, thereby, decreases current consumption.
• D) the general level of prices will fall, which will increase the disposable income of households.

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Definitions:

Acceleration

The process of increasing the speed or rate of something.

Enrichment

Activities or interventions aimed at improving a person's abilities, knowledge, and well-being.

Children with Disabilities

Describes young individuals who have physical, developmental, behavioral, or emotional conditions that require special health care or educational services.

Regular Classrooms

Traditional educational settings where students of varying abilities and backgrounds receive instruction together.