Monetary policy includes adjustments in _ so as to change .

Question

Quizplus · Accepted Answer

Monetary policy involves adjusting the federal funds rate, which is the interest rate at which banks borrow and lend reserves, in order to impact aggregate demand in the economy. By lowering interest rates, consumers and firms are incentivized to borrow and spend more, which increases aggregate demand. This can also lead to an increase in inflation in the short-run. Therefore, option D is the correct choice. Option A is incorrect because changes in the federal funds rate affect aggregate demand, not short-run aggregate supply. Option B is incorrect because changes in the quantity of money would impact both short-run and long-run aggregate supply, not aggregate demand. Option C is incorrect because open market operations are a tool used by the Federal Reserve to carry out monetary policy, but they do not directly impact aggregate demand or supply.

Monetary Policy Includes Adjustments in _ So as to Change