Figure 16-3 -Figure 16-3 Shows the Impact of Deficit Spending and the Deficit

Multiple Choice

Figure 16-3

-Figure 16-3 shows the impact of deficit spending and the corresponding economic expansion on the demand curve for money.If the Federal Reserve does not want interest rates to rise, it will

A) shift the money supply curve to the right by monetizing the deficit.
B) shift the money supply curve to the left by open market sales of government securities.
C) maintain the current targets for both M₁ and M2 money stocks.
D) engage in contractionary monetary policy, such as increases in the discount rate.