Change in monetary policy -Refer to Figure 11.3. Which of the following monetary policy actions would cause the change in money market conditions that shifted the aggregate demand curve from AD₀ to AD₁? A) An open market sale of securities. B) An open market purchase of securities. C) An increase in the bank rate. D) An increase in the overnight financing rate.

Question

Quizplus · Accepted Answer

An open market purchase of securities by the central bank injects money into the banking system, increasing the money supply. This action lowers interest rates, encouraging borrowing and spending, which shifts the aggregate demand curve to the right.

Change in Monetary Policy