In the cause-effect chain of monetary policy an autonomous increase in investment spending when the economy is at full employment will cause the Fed to seek a lower target for the federal funds rate by buying securities in the open market.

Question

Quizplus · Accepted Answer

An autonomous increase in investment spending when the economy is at full employment would not cause the Fed to seek a lower target for the federal funds rate by buying securities in the open market. Rather, it could potentially lead to inflationary pressures and prompt the Fed to raise the federal funds rate to cool off the economy.

In the Cause-Effect Chain of Monetary Policy an Autonomous Increase