When the Fed Unexpectedly Increases the Money Supply, It Will

Multiple Choice

When the Fed unexpectedly increases the money supply, it will cause an increase in aggregate demand because

A) real interest rates will fall, stimulating business investment and consumer purchases.
B) the dollar will appreciate on the foreign exchange market, leading to a decrease in net exports.
C) lower interest rates will tend to decrease asset prices (for example, stock prices) , which decreases wealth and, thereby, decreases current consumption.
D) the general level of prices will fall, which will increase the disposable income of households.