QUESTION 3 Consider the following two statements: (1) The main reason people demand and hold money (instead of, e.g., bonds) is that it eams interest payments. (2) The Fed uses the monetary policy tool of open market operations to affect interest rates. O a. Both statements are correct. O b. Both statements are incorrect. O c. Statement (1) is correct but (2) is not. O d. Statement (2) is correct but (1) is not. QUESTION 4 According to the AS-AD model, which of the following statements is true? O a. The "potential output" can be directly influenced by monetary policy. O b. An increase in the supply of money reduces aggregate demand (AD curve). O c. The invention of new technologies that increase productivity reduces an economy's "potential output". O d. An increase in consumer confidence tends to lead to an increase in GDP and an increase in the price level