A Change in the Money Supply Creates Demand and Cost

question 58

Multiple Choice

A change in the money supply creates demand and cost pressures that lead to future increases in the price level from which main sources?
I.Excess demand for output and labor
II.Inflationary expectations
III.Raw materials prices

• A) I
• B) II
• C) II and III
• D) I and II
• E) I, II, and III

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Definitions:

Purely Competitive Industry

A market structure where many firms sell identical products, and no single company can influence the market price due to competition.

Profit

The financial gain realized when the revenue gained from a business activity exceeds the costs, expenses, and taxes needed to sustain the activity.

Normal Profit

The minimum level of profit necessary for a firm to remain competitive in the market, essentially covering opportunity costs.

Equilibrium Price

The price at which the quantity of goods supplied equals the quantity of goods demanded in a market.