Which Best Describes the Keynesian Transmission Mechanism When the Money

question 137

Multiple Choice

Which best describes the Keynesian transmission mechanism when the money supply increases?

• A) The interest rate rises; this in turn reduces investment spending,which in turn raises total expenditures and shifts the AD curve rightward.
• B) The interest rate falls; this in turn stimulates investment spending,which in turn raises total expenditures and shifts the AD curve leftward.
• C) The interest rate falls; this in turn stimulates investment spending,which in turn raises total expenditures and shifts the AD curve rightward.
• D) The interest rate falls; this in turn stimulates investment spending,which in turn lowers total expenditures and shifts the AD curve leftward.

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