In the chain of cause and effect between changes in the excess reserves of commercial banks 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, as there is more money available for lending, which reduces the cost of borrowing.

In the Chain of Cause and Effect Between Changes in the Excess