The Keynesian Cause-And-Effect Sequence Predicts That a Decrease in the Money

question 106

Multiple Choice

The Keynesian cause-and-effect sequence predicts that a decrease in the money supply will cause interest rates to:

• A) fall, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP.
• B) fall, boosting investment and shifting the AD curve rightward, leading to a decrease in real GDP.
• C) rise, cutting investment and shifting the AD curve rightward, leading to an increase in real GDP.
• D) rise, cutting investment and shifting the AD curve leftward, leading to a decrease in real GDP.

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Definitions:

Long-term Decisions

Decisions that impact an organization over an extended period, usually beyond one year, involving investments, strategic direction, and structural changes.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows or investments.

Present Value

The present value of a future amount of money or series of cash flows, considering a certain return rate.

Time-adjusted Rate

A discount rate modified to account for the time value of money, often used in discounted cash flow analysis to determine present value.