Refer to Figure 15.6.All of the following Fed actions are likely to increase the aggregate demand curve from AD₁ to AD₂ except

Question

Quizplus · Accepted Answer

Raising the discount rate would increase the cost of borrowing for banks and decrease the money supply, which would shift the aggregate demand curve to the left (AD₁ to AD₀). Therefore, it would not increase the aggregate demand curve from AD₁ to AD₂. On the other hand, buying bonds in the open market, lowering the reserve requirement, and lowering the federal funds rate would increase the money supply, decrease interest rates, and stimulate borrowing and spending, which would shift the aggregate demand curve to the right.