maintaining a slack monetary policy
How does the total demand change depending on the money supply?
Monetary policy during a recession tries to increase overall demand by quickening the growth of the money supply. The expansion of the money supply will lead to lower interest rates, according to the liquidity preference theory. Lower interest rates lead to higher investment spending, which increases total demand.
Does an increase in money supply have an impact on total demand?
the services required at a specific price. Because the Fed's increased money supply lowers interest rates and increases the quantity of goods and services demanded at any given price level, the aggregate demand is pushed to the right.
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