Which of the Following Explains Expansionary Monetary Policy in the Long

question 63

Multiple Choice

Which of the following explains expansionary monetary policy in the long run?

• A) Expansionary monetary policy shifts aggregate demand to the left,moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real gross domestic product (GDP).In the long run,as resource prices fall,the short-run aggregate supply curve shifts to the right,bringing the economy back to a long-run equilibrium where no real changes to GDP have occurred.
• B) Expansionary monetary policy shifts aggregate demand to the right,moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real gross domestic product (GDP).In the long run,as resource prices rise,the aggregate demand curve shifts back to the left,causing the economy to expand.
• C) Expansionary monetary policy shifts aggregate demand to the right,moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real gross domestic product (GDP).In the long run,as resource prices rise,the short-run aggregate supply curve shifts to the left,bringing the economy back to a long-run equilibrium where no real changes to GDP have occurred.
• D) Expansionary monetary policy shifts aggregate demand to the right,moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real gross domestic product (GDP).In the long run,as resource prices fall,the short-run aggregate supply curve shifts to the right as well,causing the economy to expand.
• E) Expansionary monetary policy shifts aggregate demand to the left,moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real gross domestic product (GDP).In the long run,as resource prices rise,the short-run aggregate supply curve shifts to the left,causing the economy to contract.

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Definitions:

Specialized Resources

Inputs in the production process that have specific uses and are not easily adaptable to other types of production.

Comparative Advantage

The capacity of a person, business, or nation to create a product or offer a service with a smaller opportunity cost compared to its rivals.

Opportunity Cost

The cost of missing out on the next best alternative when making a decision.

Total Output

The total quantity of goods or services produced by a firm or an economy in a specific period.