The Linkages of the Interest-Rate-Based Transmission Mechanism of Monetary Policy

question 44

Multiple Choice

The linkages of the interest-rate-based transmission mechanism of monetary policy are summarized as follows:

• A) change in the money supply → change in speculative balances → change in transactions balances → change in planned investment → change in aggregate demand.
• B) change in the money supply → change in planned investment → change in government spending → change in aggregate demand.
• C) change in the money supply → change in interest rates → change in planned investment → change in aggregate demand.
• D) change in the money supply → change in interest rates → change in transactions balances → change in government spending → change in aggregate demand.

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