Keynesians believe that a change in the money supply first causes a change in interest rate levels, which, in turn, alters the demand for goods and services.

Question

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Keynesian economics emphasizes the role of government intervention in stabilizing the economy, and one of the main tools for this intervention is monetary policy, which involves adjusting the money supply and interest rates to influence aggregate demand. According to the Keynesian theory, changes in the money supply lead to changes in interest rates, which affect investment and consumption decisions and ultimately impact the overall level of demand in the economy.

Keynesians Believe That a Change in the Money Supply First