Using Figures for Both the Short Run and the Long

question 52

Essay

Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run equilibria side by side. Assume that the U.S. real national income is constant.

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Definitions:

Quick Ratio

Current assets less inventories divided by current liabilities. A financial ratio that measures a firm’s liquidity, the ability to pay its bills in the short run, without depending on converting inventory into cash. Also called the Acid Test.

Current Ratio

The Current Ratio is a financial metric used to evaluate a company's ability to pay its short-term liabilities with its short-term assets, indicating liquidity.

Prepaid Items

Expenses paid in advance for goods or services to be received in the future.

Statement of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company, showing how the company's operations are running, where its money is coming from, and how it is being spent.