When the Fed buys bonds
A)the supply of money increases and so aggregate demand shifts right.
B)the supply of money decreases and so aggregate demand shifts left.
C)the supply of money decreases and so aggregate demand shifts right.
D)the supply of money increases and so aggregate demand shifts left.

Question

Quizplus · Accepted Answer

When the Fed buys bonds, it injects money into the economy, increasing the supply of money. As a result, individuals and businesses have more money to spend, leading to an increase in aggregate demand. This causes a rightward shift in the aggregate demand curve.

When the Fed Buys Bonds