In the New Keynesian View, an Increase in Real Money

question 54

Multiple Choice

In the new Keynesian view, an increase in real money balances increases investment spending by

• A)giving business firms more funds to invest.
• B)raising the real interest rate, which makes saving and investing more attractive.
• C)lowering the real interest rate, which reduces the opportunity cost of investing in new plant and equipment.
• D)allowing the government to increase its spending on bridges, highways, and other public works.

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Definitions:

Muscle Fiber

An individual muscle cell, elongated and capable of contracting, that makes up skeletal muscles.

Diameters

Measurements of length through the center of a body or object from one side to the other, indicating its size in a specific direction.

Innervation

The supply of nerves to a specific body part, essential for initiating and controlling its function.

Motor Neurons

Nerve cells that transmit impulses from the central nervous system to muscles or glands, eliciting a response.