Question 04: By what process does the Federal Reserve increase Aggregate Demand and influence the level of output in the economy? Given that the "Fed" controls the money supply in the economy, if the "Fed" increases the money supply, then... The Fed increases the Money Supply .. this will cause Interest rates to [ rise or fall ] ... which will cause Investment to [ increase or decrease ] ... which will cause Aggregate Demand (= C +1+ G + (X-M)) to [ shift right or shift left ] AD . which will cause GDP - the level of output to [ increase or decrease ] as long as we were originally below our potential GDP. O A) fall, decrease, shift right, decrease O B) rise, increase, shift left, decrease ( C) rise, decrease, shift right, decrease OD) fall, increase, shift right, increase