The Effect of Expansionary Monetary Policy on Aggregate Demand Is

question 109

Multiple Choice

The effect of expansionary monetary policy on aggregate demand is as follows:

• A) the decrease in money supply causes the interest rates to drop and investment and production to increase.
• B) the increase in money supply causes the interest rates to grow and investment and production to increase.
• C) the increase in money supply causes the interest rates to drop and investment and production to increase.
• D) the increase in money supply causes the interest rates to drop and investment and production to decrease.

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Definitions:

Consumption

The use of goods and services by households, often considered a primary economic indicator.

Rivals

Competitors within a market, vying for the same customers or resources in an effort to achieve economic or strategic advantages.

Market System

(1) An economic system in which individuals own most economic resources and in which markets and prices serve as the dominant coordinating mechanism used to allocate those resources; capitalism. Compare with command system. (2) All the product and resource markets of a market economy and the relationships among them.

Incentives

Rewards or penalties designed to influence the actions or behaviors of individuals or entities in desired ways.