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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