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.

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Definitions:

Annual Income

The total amount of money earned or received in a year from employment, investments, or other sources before taxes and deductions.

Symmetrical

Symmetrical refers to an object or design that is evenly proportioned and balanced in size and shape on both sides.

Bell-shaped Distribution

A graphical representation of data where most values cluster around a central region, with fewer and fewer appearing as one moves away towards the extremes; commonly known as a normal distribution.

Normal Curve

A symmetrical, bell-shaped curve that represents the distribution of many types of data where most scores fall near the middle, with fewer scores at the extremes.