Which Scenario Best Explains the Keynesian Transmission Mechanism When the Investment

question 183

Multiple Choice

Which scenario best explains the Keynesian transmission mechanism when the investment demand curve is vertical?

• A) The interest rate falls,investment falls even more,the AD curve shifts rightward,but total expenditures do not change.
• B) The interest rate falls,investment rises,total expenditures rise,and the AD curve shifts rightward.
• C) The interest rate falls,investment falls instead of rising,and the AD curve ends up shifting leftward.
• D) The interest rate falls,but investment does not respond; there is no change in total expenditures and no shift in the AD curve.

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