-In the Above Figure, Suppose the Economy Is Initially on the Demand

question 65

Multiple Choice

-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of a fall in the nominal interest rate?

• A) There would be a movement downward along the demand for money curve MD₁.
• B) The demand for money curve would shift leftward to MD₀.
• C) There would be a movement upward along the demand for money curve MD₁.
• D) The demand for money curve would shift rightward to MD₂.

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Definitions:

Marginal Revenue

The additional revenue that a firm gains when it sells one more unit of a product or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the number of units produced.

Marginal Cost

The rise in production costs when one more unit of a product or service is produced.

Long-Run Equilibrium

A state in which a market or economy has adjusted to all internal and external changes and forces, resulting in no incentive for allocation or production adjustments.