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il63 [147K]
3 years ago
10

According to the Keynesian transmission mechanism, an increase in the money supply causes a(n) __________ in the interest rate a

nd a(n) __________ in investment, which in turn causes a(n) __________ in total expenditures and aggregate demand. a. increase; increase; decrease b. decrease; decrease; increase c. increase; decrease; decrease d. decrease; increase; increase
Business
1 answer:
Roman55 [17]3 years ago
8 0

Answer:

The correct answer is the option D: decrease; increase; increase.

Explanation:

On one hand, the monetary transmission mechanism is the process by which <em>general economic conditions tend to change in order to affect the whole economy performance</em>, and it changes as a result of changes in the monetary policy decisions.

On the other hand, the Keynesian model states that according to the monetary transmission mechanism a change in the aggregate demand could happen due to a change in the interest rate. Moreover, that monetary policy establishes that an increase in the money supply causes a<u><em> decrease </em></u>in the interest rate and therefore an <u><em>increase</em></u> in investment, which in turn causes an <u><em>increase</em></u> finally in total expenditures and aggregate demand.  

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