Which of the following will cause an increase in aggregate demand?
A) Restrictive fiscal policy.
B) An increase in the reserve requirement.
C) Expansionary monetary policy.
D) The sale of bonds by the FeD.

Question

Quizplus · Accepted Answer

Expansionary monetary policy, such as lowering interest rates or increasing the money supply, will cause an increase in aggregate demand by encouraging borrowing and spending.

Answer: D
 The sale of bonds by the Fed will decrease the money supply, which will lead to higher interest rates and less spending. This is contractionary monetary policy, which will decrease aggregate demand.

Which of the Following Will Cause an Increase in Aggregate