Question

Monetary Policy works to influence the economy in a sequence of events. Complete the following:

With a stable demand for money, the FED INCREASING the money supply will ___________ the interest rate.

With a _________interest rate the level of investment will ___________.

With a __________ level of investment the aggregate demand curve will shift to the __________________.

Monetary Policy works to influence the economy in a sequence of events. Complete the following:

With a stable demand for money, the FED INCREASING the money supply will "increase" the interest rate.

With a "lowered" interest rate the level of investment will "increase".

With a "decreasing price" level of investment the aggregate demand curve will shift to the "left"

--- Is this Correct?

Answer 1

1.With a stable demand for money, the FED increasing the money supply will decrease the interest rate.

2.with a lower interest rate,the level of investment will increase.

3.with an increase in the level of investment, the aggregate demand curve will shift to the right.

Monetary policy works to influence the economy in a sequence of events.

a.This statement is false. With an increase in money supply, interest rate will be lowered.

b.This statement is true. A lower interest rate will increase the investment.

c.This statement is also true. A lower investment will shift the aggregate demand curve to the left.

  

Money plays an important role in any economic transactions. When the money supply increases then it will lower the interest rate.Ultimately business investment opportunities increases.As a result money in the hands of the people increases making them wealthier. Thus consumer spending increases. It results in Aggregate demand to shift to its right. If investment opportunities are lowered then Aggregate demand shifts to its left.