Using Aggregate Supply and Demand Curves Drawn According to the Keynesian

question 124

Multiple Choice

Using aggregate supply and demand curves drawn according to the Keynesian view,which of the following will occur if the Fed buys bonds in the open market and the economy is below full employment?

• A) Aggregate demand will shift to the left and the unemployment rate will rise.
• B) Aggregate demand will shift to the right and the unemployment rate will fall.
• C) Aggregate demand will shift to the left and the price level will remain unchanged.
• D) Aggregate demand will shift to the right and the price level will fall.

---

Definitions:

Exchange Gain

The profit realized from the sale of securities or foreign exchange transactions when the exchange rate moves in a favorable direction.

Functional Currency

The primary currency used by a business or unit in its financial transactions, reflecting the economic environment in which it primarily operates.

Foreign Subsidiary

A company that is owned or controlled by another company (parent company) and is located in a different country.

Functional Currency

The form of money prevalent in the primary financial setting where an organization conducts its operations and accrues cash flows.