Most Central Banks Accept That, in the Long Run, Monetary

question 10

Multiple Choice

Most central banks accept that, in the long run, monetary policy has an effect on

• A)the price level and the inflation rate only.
• B)the level of aggregate demand.
• C)real GDP and the price level.
• D)all real economic variables.
• E)the level of investment demand.

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Definitions:

Wealth Effect

The wealth effect is the change in consumer spending and economic behavior resulting from changes in perceived wealth, typically due to asset price variations.

Aggregate-Demand Curve

A curve that represents the total demand for all goods and services in an economy at various price levels.

Liquidity Preference Theory

is the hypothesis that investors prefer to have liquid rather than illiquid assets and will demand higher yields for longer-term securities that are less liquid.

Aggregate Demand Curve

A graph showing the total demand for goods and services within an economy at different price levels.