In the New Classical View, If the Chairman of the Fed

question 25

Multiple Choice

In the new classical view, if the Chairman of the Fed announces a 10% increase in the money supply and then takes actions that cause the money supply to grow by more than 10%, the result will be

• A)a 10% increase in the price level and no change in output.
• B)a 10% increase in the price level and an increase in output.
• C)a greater than 10% increase in the price level and an increase in output.
• D)a greater than 10% increase in the price level and no change in output.

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Definitions:

Cash Payback Period

A rephrased term for Payback Period, this is the duration required for an investment to generate cash flows that cover its initial expense.

Present Value Factor

A calculation used in determining the present value of a sum of money to be received in the future by considering a specified rate of interest.

Average Rate of Return

A financial ratio that indicates the profitability of an investment by calculating the average annual profits divided by the initial investment cost.

Present Value Factor

A factor used to determine the present value of a sum that is to be received in the future, taking into account a specific interest rate and time period.