Which of the Following Best Describes the Cause-Effect Chain of a Restrictive

question 30

Multiple Choice

Which of the following best describes the cause-effect chain of a restrictive monetary policy?

• A)A decrease in the money supply will lower the interest rate, increase investment spending, and increase GDP.
• B)A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease GDP.
• C)An increase in the money supply will raise the interest rate, decrease investment spending, and decrease GDP.
• D)An increase in the money supply will lower the interest rate, decrease investment spending, and increase GDP.

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Definitions:

Total Income

The sum of all earnings and revenues received by an individual or business, including wages, salaries, investment income, and revenue from sales or services.

Total Taxes

The aggregate amount of taxes paid by an individual, corporation, or other entity to governmental authorities within a specified period.

Payroll Tax

Taxes imposed on employers and/or employees, usually calculated as a percentage of the salaries that employers pay their staff.

Capital Intensive Techniques

Production processes that require a high investment in capital assets relative to labor.