57) According to the interest-rate-based transmission mechanism for 57) monetary

Question

57) According to the interest-rate-based transmission mechanism for 57) monetary policy, an increase in the money supply will cause the rise and leading to an increase in aggregate demand. rise and leading to a decrease in aggregate demand. rise and leading to a decrease in aggregate demand. fall and leading to an increase in aggregate demand A) interest rates to fall, causing planned real investment spending to B) interest rates to rise, causing planned real investment spending to C) interest rates to fall, causing planned real investment spending to D) interest rates to fall, causing planned real investment spending to

Explanation / Answer

As the money supply increases, the value for money reduces and inflation prevails and as inflation prevails, there's reduce in the interest and this can get to cause a rise in the investment and with this the aggregate demand increases.

Therefore A) interest rates to fall, causing planned real investment spending to rise and leading to an increase in aggregate demand is the answer.

  

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