Question

According to the Keynesian transmission mechanism, a rise in the money supply will __________ the interest rate, causing a __________ in investment demand, which then __________ Real GDP.a. raise; fall; raisesb. raise; rise; lowersc. raise; fall; lowersd. lower; fall; lowerse. lower; rise; raises

Answer 1

Answer: The correct answer "e. lower; rise; raises".

Explanation: According to the keynesian transmission mechanism, a rise in the money supply will lower the interest rate, causing a rise in investment demand, which then raises Real GDP.

because a decrease in the interest rate, would cause companies to decide to take loans to invest, thus increasing investment and as a result would increase GDP