BEC_ Monetary policy

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    Topic
  • #1733286
    j3cpa
    Participant

    A country reduces its rate of monetary growth. Which of the following is the expected result for the
    country’s economy?
    A. Higher net exports.
    B. Higher investment.
    C. Lower GDP growth.
    D. Lower interest rates.

    The answer is B – higher investment. How is this possible? When a country reduces monetary growth, that mean money supply shift left, increase in interest rate, decrease in borrowing, ultimately leads to lower investment is my thinking.

    Can someone explain it to me how I’m wrong please. Thank you.

    Edit – nvm the answer is C so my thinking is right. I spent 15 minutes on this question thinking I was wrong. GG

    Study Material:
    GLEIM
    BEC - FEB/2012
    AUD - FEB/2012
    FAR - JULY/2012
    REG - JULY/2012

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