Final answer:
Amid an increased money demand due to ATM disruptions, the theory of liquidity preference suggests that interest rates would rise if the money supply remained constant, leading to lower aggregate demand. To counteract this, the Federal Reserve can conduct open-market operations by buying government bonds, thus increasing the money supply and stabilizing aggregate demand.
Step-by-step explanation:
If a computer virus leads people to increase their demand for money due to ATM disruptions, according to the theory of liquidity preference, this will raise the interest rate if the Fed does not change the money supply. This occurs because there's a higher demand for a fixed supply of money, and as a consequence, the cost of borrowing money—interest rates—will increase. This increase in interest rates will lead to a reduction in aggregate demand as investments and expenditures that are sensitive to interest rates will decrease.
If the Fed aims to stabilize aggregate demand in response to this increase in the demand for money, it will need to address the problem by increasing the money supply. This can be addressed through open-market operations, specifically by buying federal government bonds which injects more money into the banking system and ultimately into the broader economy.
Purchasing government bonds will lead to a decrease in interest rates and an increase in aggregate demand, offsetting the initial decrease in demand due to higher interest rates. The increase in the money supply shifts the money demand curve back down, lowering the interest rate and encouraging more investment and spending, which stabilizes aggregate demand.