According to the Monetarists, After an Initial Increase in Aggregate

question 8

Multiple Choice

According to the monetarists, after an initial increase in aggregate demand,

• A) short-run aggregate supply curve will tend to shift leftward, reflecting the effect of higher wages adjusting in the long run.
• B) short-run aggregate supply curve will tend to shift leftward, reflecting the effect of lower wages adjusting in the long run.
• C) aggregate demand curve will tend to shift rightward, reflecting the effect of income adjusting in the long run.
• D) aggregate demand curve will tend to shift lower, reflecting the effect of price level adjusting in the long run.

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Definitions:

Open-Economy Macroeconomic

A branch of macroeconomics that studies economies in which international trade and financial transactions play a significant role.

Loanable Funds

The funds available for borrowing in the financial markets, involving the lending and borrowing between savers and borrowers, which determines the equilibrium interest rate.

Domestic Investment

The total amount of resources invested in the production of goods and services within a country’s borders.

Net Capital Outflow

The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners.