Aggregate demand shifts right when the Federal Reserve
A)raises personal income taxes.
B)increases the money supply.
C)institutes an investment tax credit.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

When the Federal Reserve increases the money supply, it lowers interest rates, which in turn encourages borrowing and spending by consumers and businesses. This results in an increase in aggregate demand, as more money is being spent in the economy. On the other hand, raising personal income taxes would reduce disposable income and decrease aggregate demand, and instituting an investment tax credit would only affect investment spending and may not have a significant impact on aggregate demand. Therefore, the correct answer is B.

Aggregate Demand Shifts Right When the Federal Reserve