If the stock market booms, then
A)aggregate demand increases, which the Fed could offset by purchasing bonds.
B)aggregate supply increases, which the Fed could offset by selling bonds.
C)aggregate demand increases, which the Fed could offset by selling bonds.
D)aggregate supply increases, which the Fed could offset by purchasing bonds.

Question

Quizplus · Accepted Answer

When the stock market booms, it typically leads to an increase in aggregate demand as people feel wealthier and spend more. The Federal Reserve (Fed) could offset this by selling bonds, which decreases the money supply and increases interest rates, thereby reducing spending and aggregate demand.

If the Stock Market Booms, Then