The interest-rate-based approach to the monetary policy transmission mechanism says that a change in the money supply influences aggregate demand by

Question

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According to the interest-rate-based approach, a change in the money supply affects interest rates, which in turn influences investment spending. Lower interest rates encourage borrowing and investment, increasing aggregate demand, while higher interest rates discourage borrowing and investment, decreasing aggregate demand. Therefore, the correct choice is A - a change in interest rates, which changes investment.

The Interest-Rate-Based Approach to the Monetary Policy Transmission Mechanism Says