Which Statement Correctly Describes the Sequence That Explains How an Expansionary

question 100

Multiple Choice

Which statement correctly describes the sequence that explains how an expansionary monetary policy impacts an economy?

• A) The policy lowers interest rates; lower interest rates increase investment; higher investment increases aggregate demand, which impacts output and the price level.
• B) The policy lowers interest rates; lower interest rates discourage investment; lower investment decreases aggregate demand, which impacts output and the price level.
• C) The policy raises interest rates; higher interest rates reduce spending; lower spending reduces aggregate demand, which impacts output and the price level.
• D) The policy raises interest rates; higher interest rates attract more savings; higher savings fuels investment growth, which raises aggregate demand, which impacts output and the price level.

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Definitions:

Flow Bands

Visible layers or bands in volcanic rocks that indicate the flow direction of the magma from which the rocks formed.

Igneous Rock

Rock material that has solidified and crystallized from molten magma or lava.

High-Viscosity

A term that describes a fluid's resistance to flow, with high-viscosity fluids moving more slowly than low-viscosity fluids.

Low-Viscosity

Describes a fluid that easily flows because it has a low resistance to deformation.