According to the interest-rate-based monetary policy transmission mechanism, an increase in the money supply will
A. lead to an increase in investment spending and a decrease in real GDP that is equal to the increase in investment spending.
B. lead to a decrease in investment spending and an increase in real GDP which is greater than the decrease in investment spending.
C. lead to an increase in investment spending and an increase in real GDP which is greater than the increase in investment spending.
D. lead to a decrease in investment spending and an increase in real GDP that is equal to the decrease in investment spending.
Answer: C
You might also like to view...
An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
When the SRAS curve slopes upward, the actual affect of an increase in real autonomous spending on equilibrium real GDP is smaller than predicted by the multiplier because
A) the price level rises B) the price level falls. C) real GDP increases. D) real GDP decreases.
Everything else held constant, if the sum of the required reserve ratio and the excess reserve ratio is less than one, a decrease in the currency-deposit ratio causes the M1 money multiplier to ________ and the money supply to ________
A) decrease; increase B) increase; increase C) decrease; decrease D) increase; decrease
Active changes in tax and spending by government intended to smooth out the business cycle are called ______, and changes in taxes and spending that occur passively over the business cycle are called ______.
a. automatic stabilizers; discretionary fiscal policy b. fiscal policy; automatic stabilizers c. automatic stabilizers; monetary policy d. fiscal policy; conscious fiscal policy