In the IS-LM Model When M/P Rises, in Short-Run Equilibrium

question 52

Multiple Choice

In the IS-LM model when M/P rises, in short-run equilibrium, in the usual case the interest rate ______ and output ______.

• A) rises; falls
• B) rises; rises
• C) falls; rises
• D) falls; falls

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Definitions:

Competitive Forces

The various external pressures and challenges that companies face in the market, including competition from rival firms, potential new entrants, substitute products, bargaining power of buyers, and bargaining power of suppliers.

Powerful Buyers

Buyers who have significant influence over suppliers due to their large volume of purchases, affecting terms and pricing in their favor.

Switching Costs

The costs that a consumer incurs as a result of changing brands, suppliers, or products, which can include financial costs, time, and effort.

Preemptive Practices

Strategies or actions taken by a business to prevent competitors from entering their market or to gain an advantage over them.