Steps in the transmission of monetary policy are
A) Congress increases the budget deficit, which increases the money supply, which increases aggregate supply.
B) Congress increases the money supply, which lowers the interest rate, and leads to an increase in aggregate demand.
C) the Federal Reserve lowers the federal funds rate, which lowers the real interest rate, and leads to an increase in aggregate demand.
D) the Federal Reserve increases government expenditures on goods and services, leading to an increase in aggregate demand.
E) Congress increases government expenditures on goods and services, leading to an increase in aggregate demand.
Question 2
The crowding-out effect is the tendency for
A) higher government budget deficits to increase total savings.
B) lower private saving to decrease investment.
C) higher government budget deficits to decrease investment.
D) higher private savings to decrease government budget surpluses.
E) lower private saving to increase the budget deficit.
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Answer the following short answer, please show your steps and include the formulas used