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.

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Definitions:

Information-Processing

A cognitive approach that likens human thought to the way computers process information, emphasizing the ways we take in, use, and store information.

Self-Image

An individual's conception of themselves and their attributes.

Declarative Knowledge

Information held in memory that is able to be verbalized; sometimes called knowing that.

Ego

In psychoanalysis, the part of the psyche that mediates between the conscious, the unconscious, and the external world.