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- Subject
- Money, Interest Rates And Outputeconomics-mcqs › money-interest-rates-and-output
- Published
- 31 May 2019
- Last updated
- 28 May 2026
Which sequence of events correctly describes the effects of an expansionary monetary policy?
Multiple choice question for Money, Interest Rates And Output. Select an option, then review the explanation below.
Explanation
Expansionary monetary policy raises the money supply, which reduces interest rates. Lower interest rates encourage more planned investment, leading to an increase in aggregate output. As output grows, money demand also rises. Therefore, the correct chain is an increased money supply, decreased interest rates, increased investment, higher output, and greater money demand.
More Money, Interest Rates And Output MCQs
Practice related questions from the same subject.
- 1.How does a decrease in interest rates affect the monetary base, consumer credit availability, and the cost of consumer credit?
- 2.Which variable do central banks typically set directly, and which variable adjusts as a consequence?
- 3.What is it called when the central bank purchases financial assets in the open market to expand the monetary base?
- 4.M4 is considered a __________ monetary aggregate and encompasses deposits held at both __________ and __________?
- 5.Assuming all other factors remain constant, what happens to the quantity of real money holdings when interest rates increase?