Through the domestic monetary transmission mechanism, higher interest rates cause

Name: Through the domestic monetary transmission mechanism, higher interest rates cause
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Question

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Higher interest rates lead to a decrease in the quantity of money demanded by households and firms, causing a contraction in spending which leads to a decrease in real GDP. This contraction in spending reduces demand for goods and services, leading to deflation. Thus, the correct option is D) deflation and decreased real GDP.

Through the Domestic Monetary Transmission Mechanism, Higher Interest Rates Cause