Which of these changes is likely to follow when the Fed purchases U.S.government securities?
A)Aggregate demand will decrease.
B)The demand for financial securities will increase.
C)Rate of interest will increase.
D)Planned investment spending will increase.
E)Real GDP will decrease.

Question

Quizplus · Accepted Answer

When the Fed purchases U.S. government securities, it increases the money supply, which typically lowers interest rates. Lower interest rates make borrowing cheaper, encouraging planned investment spending and potentially increasing aggregate demand and real GDP.

Which of These Changes Is Likely to Follow When the Fed