Which of the Following Is the Most Accurate Description of Events

question 154

Multiple Choice

Which of the following is the most accurate description of events when monetary authorities increase the size of commercial banks' excess reserves?

• A) A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employment.
• B) A rise in interest rates increases the money supply, causing a decrease in investment spending, output, and employment.
• C) The money supply is decreased, which increases the interest rate and causes investment spending, output, and employment to decrease.
• D) The money supply is increased, which decreases the interest rate and causes investment spending, output, and employment to increase.