When the Fed Unexpectedly Increases the Money Supply, It Will

question 86

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 depreciate on the foreign exchange market, leading to an increase in net exports.
• C)​lower interest rates will tend to increase asset prices, which increases wealth and thereby stimulates current consumption.
• D)​of all the above reasons.

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Definitions:

Collaboration

The process of two or more people or entities working together to complete a task or achieve a goal.

Hinges

Mechanical bearings that connect two solid objects, typically allowing only a limited angle of rotation between them.

Keyboard

A peripheral device composed of a set of keys used for typing, command input, or control of a computer or other devices.

Lid

It refers to a removable or hinged cover for the top of a container, used to protect or seal the contents within.