The effect on the aggregate demand curve of which of the following is most similar to the effect of a decrease in the barriers to efficient functioning of financial markets?
A)a decrease in autonomous investment
B)a decrease in the inflation rate
C)an autonomous loosening of monetary policy
D)a decrease in expected inflation
E)a negative price shock

Question

Quizplus · Accepted Answer

An autonomous loosening of monetary policy, similar to a decrease in barriers to efficient functioning of financial markets, increases the availability of credit and lowers interest rates, making it easier for businesses and consumers to borrow money and spend, resulting in an increase in aggregate demand. The other options listed do not have as direct an impact on financial markets and thus would not have as similar an effect on the aggregate demand curve.

The Effect on the Aggregate Demand Curve of Which of the Following