Which of the following is a series of events that accurately describes the steps by which restrictive monetary policy is effective?
A)Decrease in interest rate,decrease in M1,and increase in investment.
B)Decrease in M1,increase in interest rate,and decrease in investment.
C)Increase in M1,decrease in investment,and decrease in interest rate.
D)Increase in M1,increase in interest rate,and increase in investment.

Question

Quizplus · Accepted Answer

Restrictive monetary policy involves decreasing the money supply (M1) which leads to an increase in interest rates. This increase in interest rates discourages borrowing and investment, which leads to a decrease in investment. Therefore, the correct series of events is a decrease in M1, an increase in interest rate, and a decrease in investment.

Which of the Following Is a Series of Events That