The aggregate demand curve will shift outward and to the right when the Federal Reserve undertakes which of the following monetary policies?
A)Open market purchases of government securities
B)An increase in the discount rate
C)An increase in the reserve requirement
D)A reduction in loans to the U.S.Treasury
E)A more lenient supervision of savings and loan institutions

Question

Quizplus · Accepted Answer

Open market purchases of government securities increase the money supply in the economy, leading to an increase in spending and hence shifting the aggregate demand curve outward and to the right. The other options listed above either decrease the money supply or have no direct impact on it, and hence do not lead to an outward shift of the aggregate demand curve.

The Aggregate Demand Curve Will Shift Outward and to the Right