Question

Steps in the transmission of monetary policy are question 67 options:
a.the federal reserve increases government expenditures on goods and services, leading to an increase in aggregate demand.
b.congress increases the money supply, which lowers the interest rate, and leads to an increase in aggregate demand.
c.congress increases government expenditures on goods and services, leading to an increase in aggregate demand.
d.the federal reserve lowers the federal funds rate, which lowers the real interest rate, and leads to an increase in aggregate demand.
e.congress increases the budget deficit, which increases the money supply, which increases aggregate supply.

Answer 1

Answer is D: the federal reserve lowers the federal funds rate, which lowers the real interest rate, and leads to an increase in aggregate demand.

Reason: Its the US Fed which can lower the benchmark interest rates based on the overall inflation reading in the economy. Based on the inflation and growth prospects, the fed will either increase or decreases benchmark interest rates. When the rates are reduced, there in an decrease in money supply which increases aggregate demand