Part 1. Keynesian theory argues that a. decreases in the money supply lead to increases in the interest rate which increases investment which increases the level of real GDP. b. increases in the money supply lead to decreases in the interest rate which increases investment which increases the level of real GDP. c. increases in the money supply lead to decreases in the interest rate which decreases investment which decreases the level of real GDP. d. increases in the money supply cause consumers to spend more which reduces the unemployment rate and therefore increases real GDP. Part II Both Keynesians and monetarists agree that monetary policy works by shifting aggregate supply. a. true b. false

Part 1. Keynesian theory argues that

a. decreases in the money supply lead to increases in the interest rate which increases investment which increases the level of real GDP.

b. increases in the money supply lead to decreases in the interest rate which increases investment which increases the level of real GDP.

c. increases in the money supply lead to decreases in the interest rate which decreases investment which decreases the level of real GDP.

d. increases in the money supply cause consumers to spend more which reduces the unemployment rate and therefore increases real GDP.

Part II Both Keynesians and monetarists agree that monetary policy works by shifting aggregate supply.
a. true
b. false

 

answer:

Part 1 :

The correct choice is b

Explanation : – The Keynesian theory is based on the philosophy that increasing spending and consumption can stimulate economic growth . An increase in the money supply would result in more money being pumped into the economy which increases economic activity such as production , distribution and consumption and this in turn leads to an increase in the level of real GDP.

============================================================

Part 2 : –

The correct choice is false

Explanation : – Keynesian economists believe that monetary policy exerts its major effect indirectly by influencing the interest rate , whereas monetarists believe that there is a direct link between monetary policy and aggregate demand .

Add Comment
0 Answer(s)
  • Votes
  • Oldest

Your Answer

By posting your answer, you agree to the privacy policy and terms of service.