A Keynesian econometric model is likely to emphasize that monetary policy affects economic activity through changes in
A) the money supply.
B) reserve requirements.
C) interest rates.
D) currency holding by the public.

Question

Quizplus · Accepted Answer

Keynesian economics highlights the importance of interest rates in determining economic activity. Interest rates are used by the central bank to influence borrowing and lending behavior in the economy, which can impact consumption, investment, and overall demand levels. Therefore, a Keynesian econometric model is likely to indicate that changes in monetary policy affect economic activity primarily through changes in interest rates.

A Keynesian Econometric Model Is Likely to Emphasize That Monetary