If businesses and consumers become pessimistic,the Federal Reserve can attempt to reduce the impact on the price level and real GDP by
A)increasing the money supply,which raises interest rates.
B)increasing the money supply,which lowers interest rates.
C)decreasing the money supply,which raises interest rates.
D)decreasing the money supply,which lowers interest rates.

Question

Quizplus · Accepted Answer

If businesses and consumers become pessimistic, the Federal Reserve can attempt to stimulate aggregate demand by increasing the money supply, which lowers interest rates. This reduces the cost of borrowing and encourages businesses and consumers to spend and invest more, thereby boosting real GDP and offsetting the negative impact of pessimism on the economy.

If Businesses and Consumers Become Pessimistic,the Federal Reserve Can Attempt