AP Macroeconomics Question 186: Answer and Explanation

Test Information

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Question: 186

10. According to Keynesian theory, a decrease in the money supply would

  • A. lower interest rates, which would encourage borrowing and, therefore increase spending.
  • B. raise interest rates, which would discourage borrowing and, therefore, increase spending.
  • C. raise interest rates, which would discourage borrowing and, therefore, reduce spending.
  • D. lower interest rates, which would discourage borrowing and, therefore, reduce spending.
  • E. raise interest rates, which would encourage borrowing and, therefore, reduce spending.

Correct Answer: C

Explanation:

(C)