According to Keynesians, for monetary policy to have a stimulative effect on GDP, a(n):
A) increase in the money supply lowers the interest rate in order to stimulate higher levels of investment.
B) increase in the money supply lowers the interest rate in order to lower levels of investment.
C) decrease in the money supply lowers interest rate in order to stimulate higher levels of investment
D) decrease in the money supply causes the interest rate to rise in order to stimulate higher levels of investment.
E) increase in the money supply causes the interest rate to rise in order to stimulate higher levels of investment.

Question

Quizplus · Accepted Answer

According to Keynesians, an increase in the money supply would lower the interest rate, which would make it cheaper for businesses to borrow money for investment purposes. This would stimulate higher levels of investment and ultimately lead to an increase in GDP.

According to Keynesians, for Monetary Policy to Have a Stimulative