According to the interest-rate-based monetary policy transmission mechanism, an increase in the money supply generates
A. an increase in aggregate supply since the supply of money is part of aggregate supply.
B. increased spending on consumer goods and services directly, which causes an increase in aggregate demand.
C. lower interest rates, which causes an increase in planned real investment spending and an increase in aggregate demand.
D. an increase in nominal GDP and a change in the price level, but no change in real GDP.
Answer: C
You might also like to view...
Using the figure above, suppose with no trade Liz and Joe each produce at point A on their respective PPFs. Then, Liz suggests that they specialize and trade. She would produces only smoothies and Joe would produce only salads
Then she would sell 10 smoothies to Joe at a price of 2.5 salads per smoothie. In this scenario, A) Liz gains 10 smoothies and 5 salads, and Joe gains 5 smoothies. B) Liz gains 5 smoothies, and Joe gains 10 smoothies. C) Liz gains 10 smoothies, and Joe loses 5 smoothies. D) Liz gains 5 smoothies and 5 salads, and Joe loses 5 salads. E) Neither of the individuals gains from trade.
Why might a nation seek to maintain a pegged exchange rate?
A) It makes business planning easier for firms involved in the global economy. B) It removes the need to intervene in the foreign exchange market. C) It ensures that the exchange rate will remain at its equilibrium. D) It makes their currency more attractive on the foreign exchange market.
The shutdown decision can be restated in terms of producer surplus by saying that a firm should produce in the short run as long as
A) revenue exceeds producer surplus. B) producer surplus is positive. C) producer surplus exceeds fixed cost. D) producer surplus exceeds variable cost. E) profit and producer surplus are equal.
If a business is losing money on the goods it is producing, this indicates that
a. the business is producing the goods at the lowest possible cost. b. the resources used to produce the goods are too expensive and need to be subsidized in order to be used productively. c. the resources would be used more productively producing other things. d. the consumer values the goods highly relative to costs.