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Answer: A

Economic theory suggests that ________ interest rates are ________ important than ________ interest rates in explaining investment behavior.

  1. A) nominal; more; real
  2. B) real; less; nominal
  3. C) real; more; nominal
  4. D) market; more; real
Front

According to the traditional interest-rate channel, expansionary monetary policy lowers the real interest rate, thereby raising expenditure on

  1. A) business fixed investment.
  2. B) government expenditure.
  3. C) consumer nondurables.
  4. D) net exports.
Front

The monetary transmission mechanism that links monetary policy to GDP through real interest rates and investment spending is called the

  1. A) traditional interest-rate channel.
  2. B) Tobins' q theory.
  3. C) wealth effects.
  4. D) cash flow channel.
Front
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