Assume the Keynesian Transmission Mechanism Is Operational and the Economy

question 144

Multiple Choice

Assume the Keynesian transmission mechanism is operational and the economy is currently operating in the horizontal portion of the AS curve.If the money supply decreases and the demand for money curve is downward sloping and investment is interest-____________,then Real GDP will ___________________.

• A) sensitive; fall
• B) insensitive; fall
• C) sensitive; rise
• D) insensitive; rise
• E) sensitive; remain unchanged

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Definitions:

Describe the Problem

The act of detailing or explaining an issue or challenge clearly and precisely to aid in understanding and resolution.

Subordinate

An individual or entity that is lower in rank, position, or importance relative to another.

Psychological Reactance

A behavioral response to restrictions on personal freedoms, often resulting in a desire to reclaim or reassert those freedoms.

Providing Alternatives

Offering different options or choices as solutions to a particular problem or issue.