How does monetary policy work in the short run?
A. Fed open market purchases, reserves/money supply increase, interest rates decrease, investment increases, demand increases, price and output increase
B. Fed open market purchases, reserves/money supply decrease, disposable income increases, consumption increases, demand increases, price and output increase
C. Fed open market sales, reserves/money supply increase, interest rates decrease, investment increases, demand increases, price and output increase
D. Fed open market sales, reserves/money supply increase, interest rates decrease, investment increases, demand increases, price and output increases
E. Fed open market purchases, government spending increases, demand increases, price and output increase
Ans: A. Fed open market purchases, reserves/money supply increase, interest rates decrease, investment increases, demand increases, price and output increase
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