Answer to Question #332367 in Macroeconomics for Yaya

Question

Which of the following is correct regarding the effect of expansionary monetary policy in the Keynesian model?

a. 

The consumption function swivels downward showing a fall in aggregate spending and income.

a. The consumption function swivels downward showing a fall in aggregate spending and income.

b. 

The aggregate spending curve will shift downward showing a fall in aggregate spending and income.

b. The aggregate spending curve will shift downward showing a fall in aggregate spending and income.

c. 

Investment spending will increase, which is shown by an upward shift of the aggregate spending curve.

c. Investment spending will increase, which is shown by an upward shift of the aggregate spending curve.

d. 

Firms will choose to invest less.

Answer 1

c. Investment spending will increase, which is shown by an upward shift of the aggregate spending curve.