If the Fed conducts open-market purchases,the money supply
A)increases and aggregate demand shifts right.
B)increases and aggregate demand shifts left.
C)decreases and aggregate demand shifts right.
D)decreases and aggregate demand shifts left.

Question

Quizplus · Accepted Answer

When the Fed conducts open-market purchases, it injects money into the economy, thereby increasing the money supply. This leads to lower interest rates, higher investment, and more consumption. As a result, aggregate demand shifts rightward. Therefore, choice A is the correct answer.

If the Fed Conducts Open-Market Purchases,the Money Supply