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:

Best Efforts Basis

A commitment to perform a task to the best of one's ability, often used in financial transactions to indicate that an underwriter or other party will endeavor to sell as much of an offering as possible without guarantees.

IPO Issues

Refers to the various considerations and challenges that arise during the Initial Public Offering process when a company goes public and offers shares to the public for the first time.

Shelf Prospectus

A regulatory document filed by a company that allows it to issue shares to the public without having to re-file with the securities commission for each offering.

Syndicated Offering

A financial transaction in which multiple lenders or underwriters jointly provide funds or purchase a security issuance.