Keynesian economists argue that monetary policy works through its effects on:
A) interest rates and investment.
B) price- and wage-flexibility.
C) budget deficits and trade deficits.
D) the spending and money multipliers.

Question

Quizplus · Accepted Answer

Keynesian economists argue that monetary policy works through its effects on interest rates and investment. When the central bank lowers interest rates, it becomes cheaper for businesses to borrow money, making investment more attractive, and stimulating economic growth. Conversely, when interest rates are high, borrowing becomes more expensive, and investment tends to decrease.

Keynesian Economists Argue That Monetary Policy Works Through Its Effects