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:

Rehabilitation Center

A specialized facility dedicated to the treatment, therapy, and recovery support of individuals recovering from illnesses, injuries, or addictions.

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An experimental technique used to influence or alter participants' attitudes towards a specific object, concept, or person.

Quasi-experimental

A research design that seeks to establish cause-and-effect relationships but lacks random assignment of participants to control and experimental groups.

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A psychological tendency expressed by evaluating a particular entity with some degree of favor or disfavor, reflecting how one feels about something.