In the Keynesian world a rising real money supply causes GDP to __________ by __________ the real interest rate which causes a(n)__________ in investment.

Question

Quizplus · Accepted Answer

According to Keynesian theory, an increase in the real money supply will decrease the real interest rate, which will in turn increase investment. This increase in investment will lead to an increase in GDP, as businesses will purchase more capital goods and hire more workers. Therefore, the correct answer is B, as a rising real money supply causes GDP to increase by decreasing the real interest rate which causes an increase in investment.

In the Keynesian World a Rising Real Money Supply Causes