Final answer:
An expansionary monetary policy by the Fed d. increases both investment in the U.S. and net exports by lowering interest rates and the exchange rate.
Step-by-step explanation:
If the Fed pursues an expansionary monetary policy, investment in the United States will increase and net exports will increase. This happens because the Fed will buy bonds, which increases the money supply and shifts the demand curve for bonds. Higher bond prices result in a reduced interest rate, encouraging more investment. Additionally, a lower interest rate decreases the demand for and increases the supply of dollars in the currency market, leading to a reduced exchange rate. A lower exchange rate makes U.S. goods cheaper for foreign buyers and stimulates the growth in net exports. The combined impact of higher investment and increased net exports shifts the aggregate demand curve to the right, helping to close recessionary gaps.