14. when the Fed lowers the federal funds rate, the quantity of money (increases

Question

14. when the Fed lowers the federal funds rate, the quantity of money (increases/decreases) and the supply of loanable funds (increases/decreases). 15, when the Fed raises the federal funds rate, the consumption expenditure (increases/decreases) and investment (inc reases/decreases). 16. What three components of aggregate expenditure are affected when there is a change in monetary policy? 17. When the economy is in a recession, the Fed can (lower/raise) the federal funds rate, which (increases/decreases) aggregate demand and (increases/decreases) real GDP. 18. To fight a recession, the Fed can (lower/raise) the federal funds rate by (buying/selling) securities.

Explanation / Answer

Lowering of federal funds rate is an expansionery monetary policy, it increases the money supply in the market. It may lead to inflation as it will increase the loanable funds and overall increased money supply.

Ans 14. When fed lowers the federal funds rate, the quantity of money increases and the loanable funds increases.

I have answered the first question, pls repost for others.

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