The Keynesian transmission mechanism for monetary policy asserts that changes in the money supply
A)affect the price level, which affects the level of aggregate supply.
B)affect the price level, which affects the IS curve.
C)affect the price level, which affects the level of aggregate demand.
D)affect real interest rates, which affect the level of aggregate supply.
E)affect real interest rates, which affect the level of aggregate demand.

Question

Quizplus · Accepted Answer

The Keynesian transmission mechanism suggests that changes in the money supply affect real interest rates, which in turn influence the level of aggregate demand through investment and consumption decisions.

The Keynesian Transmission Mechanism for Monetary Policy Asserts That Changes