In the ISLM framework,an expansionary monetary policy causes aggregate output to ________ and the interest rate to ________,everything else held constant.
A)increase;increase
B)increase;decrease
C)decrease;decrease
D)decrease;increase

Question

Quizplus · Accepted Answer

An expansionary monetary policy increases the money supply and, as a result, lowers the interest rate. Lower interest rates stimulate investment, which in turn increases aggregate output.

In the ISLM Framework,an Expansionary Monetary Policy Causes Aggregate Output