According to the Keynesian transmission mechanism, a rise in the money supply will lower the interest rate, causing a rise in investment demand, which then raises real GDP.
The monetary transmission mechanism, shifts as a result of changes in monetary policy decisions, this is the process by which general economic conditions tend to change in order to affect the performance of the entire economy.
The Keynesian mechanism, on the other hand, asserts that, in accordance with the monetary transmission mechanism, a change in the interest rate may result in a change in aggregate demand. Additionally, according to this monetary policy, a rise in the money supply results in a decline in the interest rate, which in turn encourages an increase in investment, which ultimately raises total spending and aggregate demand.
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