If the Fed's objective is to stimulate the economy,which of the following gives the correct sequence of events?
A)The money supply increases,interest rates decrease,investment increases,and AD increases.
B)The money supply increases,interest rates decrease,investment increases,and AS decreases.
C)The money supply decreases,interest rates increase,investment decreases,and AD decreases.

Question

Quizplus · Accepted Answer

When the Fed increases the money supply, this increases the amount of money available for borrowing and lending in the economy. This increase in the supply of loanable funds leads to a decrease in interest rates, making it cheaper for businesses and consumers to borrow money. With lower interest rates, investment spending tends to increase, which leads to an increase in aggregate demand (AD). Therefore, the correct sequence of events is an increase in the money supply, a decrease in interest rates, an increase in investment, and an increase in aggregate demand.

If the Fed's Objective Is to Stimulate the Economy,which of the Following