In: Economics
Economic investment refers to _____.
Changes in interest rates, all else held constant, cause a shift in _____.
The purpose of expansionary monetary policy is to increase _____.
Which of the following best describes the cause-and-effect chain of an expansionary monetary policy?
1. Option D. making new additions to a firm’s stock of capital.
Explanation: Economic investment means increasing production capacity by increasing capital stock.
2. Option D
Explanation: Change in the interest rates result in a change in both aggregate demand as well as investment demand.
3. Option C
Explanation: Expansionary monetary policy is undertaken to stimulate real GDP by increasing the money supply and economic activities.
4. Option D
Explanation: When the money supply increases, the interest rate falls which results in higher investment spending and aggregate demand. Ultimately, the real GDP increases.