Other Things Equal, We Would Expect an Excessive Increase in the Supply

question 170

Multiple Choice

Other things equal, we would expect an excessive increase in the supply of money to:

• A)increase the purchasing power of each dollar.
• B)decrease the purchasing power of each dollar.
• C)have no impact upon the purchasing power of the dollar.
• D)cause the price level to fall.

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Definitions:

Official Reserve

Assets held by a central bank in foreign currencies, gold, or other reserves, used to back liabilities and influence monetary policy.

Balance on Current Account

Refers to the difference in value between a country's exports and imports of goods, services, investment incomes, and transfers.

Capital Account Balance

A component of the balance of payments which records net changes in a country's international financial assets and liabilities, including direct investment, portfolio investment, and other investments.

U.S. Dollar

The official currency of the United States and a primary reserve currency used globally in international transactions.