When the Fed Unexpectedly Increases the Money Supply, It Will

question 130

Multiple Choice

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

• A) lower interest rates will stimulate business investment and consumer purchases.
• B) real interest rates will fall, causing the dollar to depreciate and net exports to rise.
• C) lower interest rates will cause the value of assets (for example, stocks) to rise.
• D) all of the above are correct.