The interest-rate-based transmission mechanism for monetary policy in the Keynesian system indicates that
A. decreases in the money supply lead to increases in the interest rate, which increases investment, which increases the level of real GDP.
B. increases in the money supply lead to decreases in the interest rate, which increases investment, which increases the level of real GDP.
C. increases in the money supply cause people to spend more, leading to increases in real GDP.
D. increases in the money supply lead to decreases in the interest rate, which decreases investment, which decreases the level of real GDP.
Answer: B
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