Question

If the Federal Reserve purchases securities, then:

a. consumer spending will increase and AD will shift right.
b. consumer spending will decrease and AD will shift left.
c. government spending will increase and AD will shift right.
d. investment spending will increase and AD will shift right.
e. investment spending will decrease and AD will shift left.

Answer 1

a. consumer spending will increase and AD will shift right.

Step-by-step explanation:

In the case when the federal reserve acquires securities so it would increase the money supply due to which it raised the demand for the consumption, along with it the consumer spending would increased and this would lead to shifting the aggregate demand curve to the right

Therefore as per the given situation, the option a is correct

And, the rest of the options would be wrong