Based on Keynesian economic theory, which of the following will occur if the Central Bank increases the money supply? Select one: The price level will rise while the real rate of interest and the level of investment remains unchanged The real rate of interest will fall and as such investment will increase Aggregate demand will fall as prices rise The nominal rate of interest will fall but the real rate of interest will also fall as the price level falls. As a result, investment remains unchanged
Based on Keynesian economic theory, which of the following will occur if the Central Bank increases the money supply? Select one: The price level will rise while the real rate of interest and the level of investment remains unchanged The real rate of interest will fall and as such investment will increase Aggregate demand will fall as prices rise The nominal rate of interest will fall but the real rate of interest will also fall as the price level falls. As a result, investment remains unchanged
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Based on Keynesian economic theory, which of the following will occur if the Central Bank increases the money supply?
Select one:
- The price level will rise while the real rate of interest and the level of investment remains unchanged
- The real rate of interest will fall and as such investment will increase
- Aggregate demand will fall as prices rise
- The nominal rate of interest will fall but the real rate of interest will also fall as the price level falls. As a result, investment remains unchanged
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