In the Medium Run, If Government Purchases Are Increased and Nominal

question 20

Multiple Choice

In the medium run, if government purchases are increased and nominal money supply is decreased, we can expect that

• A)aggregate demand and prices will increase but interest rates will not change
• B)aggregate demand, prices, and the interest rate will all decrease
• C)aggregate demand and interest rates will decrease but prices will increase
• D)the AD-curve will shift to the right and the AS-curve will shift to the left
• E)the interest rate will increase while aggregate demand and prices may increase, decrease, or remain the same

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Definitions:

Direct Labor

The cost of wages for employees who are directly involved in the production of goods or services, considered a variable cost in financial accounting.

Direct Materials

This refers to raw materials that are directly incorporated into a finished product during the manufacturing process.

Materials Traceable

Raw materials or components that can be directly associated with a specific product or cost object in the manufacturing process.

Specific Products

Items or goods that have specific characteristics or purposes, distinguishing them from more general or broader categories of products.