In the Keynesian model,suppose the Fed sets a target for the money supply.If the IS curve shifts to the left,and the Fed wants to keep output unchanged,what should the Fed do?
A)Reduce taxes.
B)Reduce the money supply.
C)Increase taxes.
D)Increase the money supply.

Question

Quizplus · Accepted Answer

If the IS curve shifts to the left, it means that there is a decrease in output and a decrease in the demand for money. If the Fed wants to keep output unchanged, it needs to increase the money supply to inject liquidity into the market and stimulate investment and consumption. Therefore, the best choice is to increase the money supply.

In the Keynesian Model,suppose the Fed Sets a Target for the Money