In the Short Run, a Permanent Increase in the Domestic

question 94

Multiple Choice

In the short run, a permanent increase in the domestic money supply causes

• A) a greater upward shift in the DD curve than that caused by an equal, but transitory, increase.
• B) a greater downward shift in the AA curve than that caused by an equal, but transitory, increase.
• C) a smaller upward shift in the AA curve than that caused by an equal, but transitory, increase.
• D) a smaller downward shift in the AA curve than that caused by an equal, but transitory, increase.
• E) a greater upward shift in the AA curve than that caused by an equal, but transitory, increase.

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Definitions:

Bond Carrying Value

The net value of a bond on a company's balance sheet, equivalent to the bond's face value adjusted for any premiums paid or discounts received.

Straight-Line Amortization

A method of systematically reducing the book value of an intangible asset over its useful life by allocating equal amortization expenses each period.

Bond Interest Expense

The cost a company incurs for borrowing money through issuing bonds, represented as interest payments to bondholders.

Annual Interest

The interest amount accumulated over one year on borrowed funds or investments.