A Change in the Level of the Supply of Money

question 39

Multiple Choice

A change in the level of the supply of money

• A) increases the long-run values of the interest rate and real output.
• B) decreases the long-run values of the interest rate and real output.
• C) has no effect on the long-run values of the interest rate, but may affect real output.
• D) has no effect on the long-run values of real output, but may affect the interest rate.
• E) has no effect on the long-run values of the interest rate and real output.

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Definitions:

Manufacturing Firms

Companies engaged in the industrial process of converting raw materials into finished products through human labor and machinery.

Disposable Income

The disposable income households have for expenditures and savings, post-income taxation.

C + I

A formula component in macroeconomics representing total private consumption (C) plus total private investment (I).

MPS

The marginal propensity to save, which is the fraction of an additional unit of income that is saved rather than spent.