Refer to Figure 15.6.All of the following Fed actions are likely to increase the aggregate demand curve from AD₁ to AD₂except

Question

Quizplus · Accepted Answer

Raising the discount rate is likely to decrease borrowing by banks and decrease the money supply, which would shift the aggregate demand curve to the left (from AD₁ to AD₀). Therefore, it is the only action that is not likely to increase the aggregate demand curve. Buying bonds, lowering the reserve requirement, and lowering the federal funds rate all increase the money supply and encourage borrowing, which is likely to increase demand and shift the aggregate demand curve to the right.