Question

If the Fed increases the quantity of money, then O A. both the aggregate demand curve and the aggregate supply curve shift leftward. O B. aggregate demand increases and the AD curve shifts rightward. O C. the quantity of real GDP demanded decreases and there is a movement up along the AD curve. O D. the quantity of real GDP demanded increases and there is a movement down along the AD curve. O E. aggregate demand decreases and the AD curve shifts leftward.​

Answer 1

If the Fed increases the quantity of money, then: B. aggregate demand increases and the AD curve shifts rightward.

The Federal Reserve System is popularly referred to as the "Fed" and it was created by the Federal Reserve Act, which was passed by the U.S Congress on the 23rd of December, 1913. Also, the Fed began operations in 1914 and just like all central banks, the Federal Reserve (Fed) is an agency of government of the United States of America.

Basically, the Fed controls the issuance of currency (money) in United States of America, in order to promote public goals such as

• Economic growth

• Low inflation

• The smooth operation of financial markets.

An increase in the quantity of money by the Fed would result in an increase in aggregate demand (AD) and the AD curve shifts rightward because more goods and services are demanded by consumers.

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