Suppose the Fed announces that is lowering its target, interest rate by 75 basis

Question

Suppose the Fed announces that is lowering its target, interest rate by 75 basis points, or 0.75 percentage point. To do this, the Fed will use open-market operations to _______ the _________ money by _________ the public. Suppose the following graph shows the aggregate demand curve for this economy. The Fed's policy of targeting a lower interest rate will _______ the cost of borrowing, causing residential and buiseness investment spending to ________ and the quantity of output demanded to _______ at each price level.

Explanation / Answer

In order to increase the supply of money, the Fed will buy bonds from the public under open market operations.

Buying of bonds in exchange of money will increase money supply in the economy.

Correct option: buying bonds from

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