Keynesian Theory

question 82

Multiple Choice

Keynesian theory

• A) states that open market operations result in an increase in the money supply, causing bond prices to rise and interest rates to fall, which increases the investment component of aggregate demand.
• B) states that changes in the money supply have no impact on GDP in either the short or long run.
• C) is the same as the classical transmission mechanism in all essential elements.
• D) states that an increase in the money supply will lower interest rates and thereby shift the long-run aggregate supply curve to the right.

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