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Which of the Following Describes a Part of the Transmission

Question 34

Multiple Choice

Which of the following describes a part of the transmission mechanism?


A) a change in real money balances causes a portfolio disequilibrium and asset holders' reactions influence interest rates
B) an income tax rate cut stimulates private spending but the resulting interest rate increase dampens the income expansion
C) an increase in government spending is partially offset by the crowding out of private investment
D) the central bank undertakes open market purchases and the resulting interest rate increase encourages people to save more
E) both B and C

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