If the Fed's objective is to stimulate the economy, which of the following gives the correct sequence of events?
A. The money supply decreases, interest rates increase, investment decreases, and AD decreases.
B. The money supply increases, interest rates decrease, investment increases, and AD increases.
C. The money supply increases, interest rates decrease, investment increases, and AS decreases.
D. The money supply decreases, interest rates increase, investment increases, and AD increases.
Answer: B
You might also like to view...
Consider the demand curves for soft drinks shown in the figure above. Moving from point a to point c means that
A) the marginal benefit of each additional soft drink falls. B) the opportunity cost of another soft drink increases. C) people's incomes have decreased. D) the price of a soft drink has increased.
In general terms describe trends in the inflation rate, considering the period since 1953 . How are these trends related to movements in the inflation rate over this period?
What will be an ideal response?
A key causal link in the interest-rate-based transmission mechanism for monetary policy is from
A) investment to the interest rate. B) the money supply to excess reserves. C) a monetary policy action to excess reserves. D) real GDP to investment.
Using Figure 8.7, a shift in aggregate demand from AD1 to AD2 is most likely to cause
A. An increase in price level but no change in real output. B. A decrease in price level but no change in real output. C. An increase in real output but no change in the price level. D. An increase in real output and an increase in the price level.