The Interest-Rate-Based Monetary Policy Transmission Mechanism Argues That an Increase

question 255

Multiple Choice

The interest-rate-based monetary policy transmission mechanism argues that an increase in the money supply

• A) has no effect on aggregate demand but reduces long-run aggregate supply.
• B) has no effect on aggregate demand but increases short-run aggregate supply.
• C) causes interest rates to fall, which causes an increase in planned investment, and an increase in aggregate demand.
• D) causes the inflation rate to decline, which causes an increase in household consumption spending and an increase in aggregate demand.

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Definitions:

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Clarity

The quality of being easily understood or free from ambiguity.

Order Instrument

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Payee

The individual or entity to whom a check, draft, or note is made payable.