Changes in the Quantity of Money Lead to Real Changes

question 62

Multiple Choice

Changes in the quantity of money lead to real changes in the economy.If this is the case,why would the central bank ever stop increasing the money supply?

• A) Although there is a short-run incentive to increase the money supply,these effects wear off in the long run as prices adjust and then drive up the value of money.
• B) The government has rules in place on the maximum amount the money supply can be increased in a given fiscal year.
• C) Although there is a short-run incentive to increase the money supply,these effects wear off in the long run as prices adjust and then drive down the value of money.
• D) Increasing the money supply is not a politically popular action and may lead to leaders of the central bank not getting reelected.
• E) The short-run benefits are outweighed by the short-run costs of increases in the money supply.

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Definitions:

EOL Criterion

A set of standards or conditions used to determine the end of life or discontinuation of a product, service, or process.

Gross Profits

The gap between earnings and the expense of products sold, prior to subtracting overhead costs, salaries, taxes, and interest charges.

EMV Decision

A decision-making rule that selects the option with the highest expected monetary value, considering all possible outcomes.

Gross Profits

The difference between revenue and the cost of goods sold (COGS), indicating how much a company earns after subtracting the costs associated with making and selling its products or services.