Which of the following represents the chain of causation for contractionary monetary policy?
A. A decrease in investment increases the interest rate, which decreases the money supply, which decreases real GDP.
B. An increase in the money supply reduces the interest rate, which increases investment, which decreases real GDP.
C. A decrease in real GDP decreases investment, which decreases the money supply, which increases the interest rate.
D. A decrease in the money supply increases the interest rate, which decreases investment spending, which decreases real GDP.
Answer: D
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a. true b. false
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