In the cause-effect chain linking changes in the banks' excess reserves and the resulting changes in output and employment in the economy,
A) a decrease in aggregate demand will increase output.
B) an increase in the money supply will decrease the rate of interest.
C) a decrease in excess reserves will increase the money supply.
D) a decrease in the rate of interest will decrease aggregate demand.

Question

Quizplus · Accepted Answer

An increase in the money supply typically leads to a decrease in the rate of interest because more funds are available for lending, reducing the cost of borrowing.

In the Cause-Effect Chain Linking Changes in the Banks' Excess