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 appreciate on the foreign exchange market, leading to a decrease in net exports.
c. lower interest rates will tend to decrease asset prices (for example, stock prices), which decreases wealth and, thereby, decreases current consumption.
d. the general level of prices will fall, which will increase the disposable income of households.
A
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Of the following four motorists, who is speculating?
A) The one driving on empty, looking for the best gasoline price in town B) The one who fills his gasoline tank believing he has found the lowest gas price around C) The one who fills his gasoline tank on news Iraq has once again invaded Kuwait D) All of the above. E) None of the above.
Which of the following is true of the consumption function? a. A decrease in flat tax results in an upward shift of the consumption function
b. An increase in interest rates results in an upward rotation of the consumption function. c. An increase in the expected future income results in an upward rotation of the consumption function. d. A decrease in the marginal propensity to save results in a downward shift of the consumption function.