QuestionDecember 17, 2025

Loosening monetary policy causes interest rates to __ , and consumption and investment to __ fall; increase fall; decrease rise; decrease rise; increase

Loosening monetary policy causes interest rates to __ , and consumption and investment to __ fall; increase fall; decrease rise; decrease rise; increase
Loosening monetary policy causes interest rates to __ , and consumption and investment to
__
fall; increase
fall; decrease
rise; decrease
rise; increase

Solution
4.1(169 votes)

Answer

fall; increase Explanation 1. Identify the effect of loosening monetary policy Loosening monetary policy increases money supply. 2. Determine impact on interest rates More money supply leads to lower borrowing costs, so interest rates **fall**. 3. Determine impact on consumption and investment Lower interest rates encourage borrowing, so consumption and investment **increase**.

Explanation

1. Identify the effect of loosening monetary policy<br /> Loosening monetary policy increases money supply.<br />2. Determine impact on interest rates<br /> More money supply leads to lower borrowing costs, so interest rates **fall**.<br />3. Determine impact on consumption and investment<br /> Lower interest rates encourage borrowing, so consumption and investment **increase**.
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