Which of the following actions can the Fed take to decrease the equilibrium interest rate? A. increase the money supply B. increase money demand C. decrease the money supply D. decrease money demand E. both (a) and (d)
Fed will reduce the demand for money and increase the money supply. The consistent answers are and
Option E The equilibrium interest rate will decrease by either increasing money supply or decreasing money demand.
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The circular-flow diagram is a simple model of the macroeconomy in which A. the flow of money into each market or sector exceeds the flow of money coming out of that market or sector. B. the value of stocks equals the value of bonds. C. households own the factors of production. D. there is only one household and one firm. E. goods and services are sold in factor markets.