The steps in the transmission of monetary policy are
A)Congress increases government expenditures on goods and services,leading to an increase in aggregate demand.
B)Congress increases the money supply,which lowers the interest rate,and leads to an increase in aggregate demand.
C)the Federal Reserve increases government expenditures on goods and services,leading to an increase in aggregate demand.
D)the Federal Reserve lowers the federal funds rate,which lowers the real interest rate and leads to an increase in aggregate demand.
E)Congress increases the budget deficit,which increases the money supply,which increases aggregate supply.

Question

Quizplus · Accepted Answer

The transmission of monetary policy occurs through the actions of the Federal Reserve, particularly in adjusting the federal funds rate, which affects other interest rates and ultimately the level of aggregate demand in the economy. By lowering the federal funds rate, the real interest rate decreases, encouraging borrowing and spending and leading to an increase in aggregate demand. The other choices do not accurately describe the transmission of monetary policy.

The Steps in the Transmission of Monetary Policy Are