When the Fed increases the money supply
A) the interest rate rises and this stimulates consumption spending.
B) people spend less because they have more money.
C) the interest rate falls and this stimulates investment spending.
D) the interest rate rises and this stimulates investment spending.
Answer: C
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M2 includes:
a. Currency in circulation + Reserves of financial intermediaries (e.g., banks) + Checking Accounts + Near Money. b. Currency in circulation + Checking Accounts c. Currency in circulation + Cash inside financial intermediaries + Deposits at the central bank + Checking Accounts + Near Money. d. Currency in circulation + Checking Accounts + Near Money. e. Monetary base plus currency in circulation.