In the short run,lowering the federal funds rate shifts the aggregate demand curve ________ so that real GDP ________ and the price level ________.
A)rightward;increases;rises
B)leftward;decreases;rises
C)rightward;increases;falls
D)leftward;decreases;falls
E)rightward;decreases;rises

Question

Quizplus · Accepted Answer

Lowering the federal funds rate, which is a monetary policy tool used by the Federal Reserve, increases the money supply in the economy, which makes it easier for consumers and businesses to borrow money. This, in turn, leads to an increase in consumption and investment, which shifts the aggregate demand curve rightward. As a result, real GDP increases and the price level rises in the short run.

In the Short Run,lowering the Federal Funds Rate Shifts the Aggregate