If the Fed increases the quantity of money and lowers the federal funds rate,real GDP ________ and the price level ________.
A)increases;increases
B)increases;decreases
C)decreases;increases
D)decreases;decreases
E)increases;does not change

Question

Quizplus · Accepted Answer

When the Fed increases the quantity of money and lowers the federal funds rate, it stimulates borrowing and spending, leading to an increase in aggregate demand. This results in an increase in real GDP. Additionally, the increase in the quantity of money can lead to inflationary pressures, causing the price level to increase. Therefore, real GDP increases and the price level increases.

If the Fed Increases the Quantity of Money and Lowers