The chain of events that results from an expansionary monetary policy is ?
Correct answer: B. money supply increases the interest rate decrease planned investment increases aggregate output increases and money demand increase
- A. aggregate output increases the demand for money increase the interest rate increase planned investment
- B. money supply increases the interest rate decrease planned investment increases aggregate output increases and money demand increase
- C. money supply increases the interest rate increase planned investment increases aggregate output increases and money demand increases
- D. money demand increases the interest rate decreases planned investment increases aggregate output increases and money demand increases
Explanation
An expansionary monetary policy raises the money supply, lowers the interest rate, increases planned investment, and raises aggregate output. Higher output then increases the demand for money, so option b gives the correct sequence.
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