In the Keynesian world a falling real money supply causes GDP to __________ by __________ the real interest rate which causes a(n)__________ in investment.
A) increase; increasing; increase
B) increase; decreasing; increase
C) decrease; increasing; increase
D) decrease; increasing; decrease

Question

Quizplus · Accepted Answer

In the Keynesian framework, a falling real money supply leads to an increase in the real interest rate. This higher interest rate makes borrowing more expensive, which typically leads to a decrease in investment. Consequently, this reduction in investment can lead to a decrease in GDP.

In the Keynesian World a Falling Real Money Supply Causes