Compared to the Fixed-Price/fixed-Wage Model,in the Keynesian Model with a Flexible

question 10

Multiple Choice

Compared to the fixed-price/fixed-wage model,in the Keynesian model with a flexible price but fixed wage,an increase in the money stock will cause output to rise by

• A)less while the interest rate will fall by more.
• B)less and the interest rate to fall by less.
• C)more but the interest rate to fall by less.
• D)more and the interest rate to fall by more.

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Definitions:

Long-Run Equilibrium

Refers to a state in an economy where all factors of production are efficiently utilized, and supply equals demand, leading to stable prices and full employment over time.

Money Supply

The aggregate financial resources present in an economy at a given time, which include currency, coinage, and the deposits in both current and savings accounts.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary depending on income level, type of good, or service.

Government Spending

Government Spending encompasses all expenditure by government bodies and agencies, including investments, public services, and defense spending.