According to the Classical View, to Prevent Price-Level Changes When

question 57

Multiple Choice

According to the classical view, to prevent price-level changes when real output is growing by 3 per cent per year, the money supply must

• A) Decrease by 3 per cent per year.
• B) Increase by 3 per cent per year.
• C) Increase by more than 3 per cent per year.
• D) Remain constant.

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Definitions:

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulation of banks, and stability of the financial system.

Interest Rates

The amount charged, expressed as a percentage of principal, by lenders to borrowers for the use of money as a loan, influencing economic activity.

Unemployment Insurance

A government program that provides temporary financial assistance to unemployed workers who have lost their jobs through no fault of their own.

Contributory Program

A social welfare system that requires individuals to contribute through taxes or payments in order to be eligible for benefits or services.