In the New Keynesian Approach, an Increase in the Nominal

question 19

Multiple Choice

In the new Keynesian approach, an increase in the nominal money supply affects output by

• A)directly increasing the wealth of consumers and, therefore, their spending.
• B)reducing the real interest rate, thereby stimulating consumption, investment, and net exports.
• C)allowing the government to increase its expenditures.
• D)increasing the funds available for saving, thereby stimulating investment spending.

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Definitions:

Wages Expense

The total cost incurred by a company for the payment of wages to its employees during a specific period.

Adjusting Entry

Financial records prepared at the close of an accounting timeframe to attribute profits and outlays to the specific period in which they happened.

Accumulated Depreciation

The cumulative depreciation of an asset up to a single point in its life, reflecting how much of the asset's value has been used up over time.

Fixed Asset

Long-term tangible property, plant, or equipment that a firm owns and uses in its operations to generate income.