The Monetary Transmission Mechanism Provides a Partial Explanation for the Downward

question 69

Multiple Choice

The monetary transmission mechanism provides a partial explanation for the downward slope of the AD curve. For a given vertical M^S curve, the explanation for the negative relationship between the price level and aggregate demand is as follows: A rise in the price level shifts the M_D curve

• A)to the left, the interest rate falls, and desired investment expenditure rises.
• B)to the left, the interest rate rises and desired investment expenditure falls.
• C)to the right, the interest rate rises and desired investment expenditure falls.
• D)to the right, the interest rate falls and desired investment expenditure falls.
• E)to the right, the interest rate rises and desired investment expenditure rises.