Trace through the Keynesian cause-and-effect sequence. An increase in the money supply will cause the interest rate to
a. fall, boosting investment and shifting the AD curve to the right, leading to an increase in real GDP
b. fall, boosting investment and shifting the AD curve to the right, leading to a decrease in real GDP
c. rise, cutting investment and shifting the AD curve to the right, leading to an increase in real GDP
d. rise, boosting investment and shifting the AD curve to the left, leading to an increase in real GDP
e. fall, cutting investment and shifting the AD curve to the left, leading to a decrease in real GDP
A
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What criticism does the textbook level against the cost-plus-markup theory of price setting?
A) The theory does not agree with what businessmen say about price setting. B) The theory does not account for vastly different percentage markups on different products. C) The theory implies firms will sometimes want to set prices below average cost per unit. D) The theory ignores sunk costs. E) All of the above.
The two key factors that trigger speculative attacks on emerging market currencies are
A) deterioration in bank balance sheets and severe fiscal imbalances. B) deterioration in bank balance sheets and low interest rates abroad. C) low interest rates abroad and severe fiscal imbalances. D) low interest rates abroad and rising asset prices.