In a macroeconomic model,increases in the money supply decrease the interest rate,increase investment,and thus raise employment and real GDP.

Question

Quizplus · Accepted Answer

This is based on the theory of the loanable funds market, which suggests that an increase in the money supply leads to a decrease in the interest rate, thus making it cheaper for firms to borrow and invest in capital goods, leading to an increase in employment and real GDP in the short run.

In a Macroeconomic Model,increases in the Money Supply Decrease the Interest