Which of the following best describes how expansionary monetary policy affects the aggregate demand curve in the aggregate demand-aggregate supply model?
A) Expansionary monetary policy directly pulls money out of the loanable funds market.This lowers the interest rate,which provides a larger incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the right.
B) Expansionary monetary policy directly puts money into the loanable funds market.This lowers the interest rate,which provides a larger incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the right.
C) Expansionary monetary policy directly puts money into the loanable funds market.This raises the interest rate,which provides a larger incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the right.
D) Expansionary monetary policy directly puts money into the loanable funds market.This lowers the interest rate,which provides a larger incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the left.
E) Expansionary monetary policy directly pulls money out of the loanable funds market.This raises the interest rate,which provides a larger incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the left.

Question

Quizplus · Accepted Answer

Expansionary monetary policy involves putting money into the loanable funds market, which lowers the interest rate. This provides a larger incentive for firms to invest, which is a component of aggregate demand, causing it to shift to the right.

Which of the Following Best Describes How Expansionary Monetary Policy