Which of the Following Correctly Indicates a Potential Path for the Transmission

question 127

Multiple Choice

Which of the following correctly indicates a potential path for the transmission of expansionary monetary policy to the goods and services market?

• A) Higher real interest rates will lead to a decrease in both business investment and consumer purchases of durable items, causing a decrease in aggregate demand.
• B) Lower interest rates lead to a depreciation in the foreign exchange value of the dollar, an increase in net exports, and an expansion in aggregate demand.
• C) Higher interest rates will tend to increase asset prices, leading to a decrease in wealth that will decrease consumer spending and aggregate demand.
• D) A reduction in the general level of prices will increase the disposable income of households and aggregate demand.