QUESTI 10 points Save Answer If the Fed s objective is to stimulate the economy,

Question

QUESTI 10 points Save Answer If the Fed s objective is to stimulate the economy, which of the following gives the correct sequence of events? O The money supply decreases, interest rates increase, AD increases. OThe money supply increases, interest rates decrease, AS increases The money supply decreases, interest rates increase, AD decreases The money supply increases, interest rates decrease, AD increases QUESTI 10 points Save Answer Which of the following is NOT a reason why AD should increase when the interest rate falls? investments become more profitable buying consumption items becomes cheaper Othe incentive to save rises funding government projects through bonds becomes less costly

Explanation / Answer

Answer : 1) The correct option is D.

Because when Fed want to stimulate the economic situation then the Fed increase money supply in the economy which decrease the interest rate and in case of lower interest rate people like to spend more instead of savings which increase the aggregate demand (AD) in the economy.

2) The correct option is C.

Because people save more when interest rate is high and as a result aggregate spending decrease which decrease the aggregate demand (AD). Therefore, option C is not a result of falling interest rate and increasing AD.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.