Changes in the Quantity of Money Lead to Real Changes

question 62

Multiple Choice

Changes in the quantity of money lead to real changes in the economy.If this is the case,why would the central bank ever stop increasing the money supply?

• A) Although there is a short-run incentive to increase the money supply,these effects wear off in the long run as prices adjust and then drive up the value of money.
• B) The government has rules in place on the maximum amount the money supply can be increased in a given fiscal year.
• C) Although there is a short-run incentive to increase the money supply,these effects wear off in the long run as prices adjust and then drive down the value of money.
• D) Increasing the money supply is not a politically popular action and may lead to leaders of the central bank not getting reelected.
• E) The short-run benefits are outweighed by the short-run costs of increases in the money supply.

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Definitions:

Cochlea

A spiral-shaped cavity of the inner ear that plays a key role in the process of hearing by converting sound vibrations into nerve impulses.

Reds And Greens

Often refers to color vision and the ability to distinguish between these two colors, which can indicate normal or defective color vision.

Sense Of Hearing

The ability to perceive sound by detecting vibrations, changes in the pressure of the surrounding medium through time, through an organ such as the ear.

Bilateral

Involving or relating to two sides; affecting or pertaining to both sides of something.