In the Long Run an Increase in the Money Supply

question 42

Short Answer

In the long run an increase in the money supply causes the price level to __________. The price level moves in this direction because an increase in the money supply creates __________ in the money market that causes people to ________ spending.

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Definitions:

Exchange Rates

The equivalent worth of one currency in terms of another during conversion.

Currency

Money in any form when in use or circulation as a medium of exchange, especially circulating banknotes and coins.

Hamburger Standard

An informal way of measuring purchasing power parity (PPP) between nations, using the price of a McDonald's hamburger as the benchmark.

Undervalued Currency

A currency whose value is lower than what is perceived as its true value based on economic fundamentals or market conditions.