Which of the following statements about the ripple effects of monetary policy is FALSE? Monetary policy can
A)raise the federal funds rate and shift the aggregate demand curve leftward.
B)raise the federal funds rate, thereby raising the real interest rate and increasing potential GDP.
C)raise the federal funds rate, thereby decreasing the quantity of money, raising the real interest rate, and decreasing investment.
D)lower the federal funds rate, thereby lowering the real interest rate and increasing aggregate demand.
E)lower the federal funds rate, thereby increasing the supply of loanable funds, and lowering the exchange rate.

Question

Quizplus · Accepted Answer

Raising the federal funds rate typically raises the real interest rate, which can decrease investment and aggregate demand, but it does not increase potential GDP. Potential GDP is determined by factors like technology and resources, not by interest rates.

Which of the Following Statements About the Ripple Effects of Monetary