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Question
Suppose the Fed increases the money supply. As a result of this, people deposit excess funds into their bank accounts, causing banks to have excess reserves. As a result, the banks lower the interest rates that they charge on loans, and investment rises, causing an increase in aggregate spending. This is known as a(n)
A) direct effect of monetary policy.
B) indirect effect of monetary policy.
C) direct effect of fiscal policy.
D) indirect effect of fiscal policy.
Answer
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Related questions
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