The monetary transmission mechanism that assumes that money supply growth stimulates the economy primarily by encouraging investment is

Question

Quizplus · Accepted Answer

The interest-rate-based transmission mechanism posits that changes in the money supply influence the economy mainly through their effect on interest rates. When the money supply increases, it typically leads to lower interest rates, making borrowing cheaper. This encourages investment by businesses and spending by consumers, thereby stimulating economic activity.

The Monetary Transmission Mechanism That Assumes That Money Supply Growth