If the Fed orders an expansionary monetary policy, describe what will happen to the following variables relative to what would have happened without the policy: The money supply Interest rates Investment Consumption Net Exports The aggregate demand curve Real GDP The price level

The money supply will increase

Interest rates will reduce

Investment will increase

Consumption will increase

The aggregate demand curve will move rightward

Real GDP will increase

The price level will increase

Explanation:

Expansionary monetary policy is a macroeconomic policy that the Federal Reserve uses to stimulate aggregate demand in the economy, by manipulating the cost of money, supply of money and the use of money.

The money supply - Expansionary monetary policy deals with reduction in interest rate and increase in supply of money as well as reduction in required reserve ratio, all these will increase the supplier of money

Interest rates - Expansionary monetary policy is a policy that lowers the interest rate in order to stimulate aggregate demand.

Investment: Increase in aggregate demand will increase investment as a result of expansionary monetary policy

Consumption - There will be increase in consumption

Net Exports - Net export will increase as a result of increase in production and access to finance

The aggregate demand curve - The aggregate demand curve will move rightward

Real GDP - Real GDP will increase as a result of increase in production stimulated by increase in aggregate demand.

The price level - The price level will increase as a result of increase in money supply