In the Long Run, When the Fed Increases the Quantity

question 436

Multiple Choice

In the long run, when the Fed increases the quantity of money,

• A) no real variable changes.
• B) the price level falls.
• C) the real interest rate rises.
• D) the nominal interest rate falls.

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Definitions:

Loanable Funds

A term referring to all the money available for borrowing in the financial markets, from various sources including savings and investments.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal, typically over a one-year period.

Investment

The act of spending money with the expectation of obtaining an additional income or profit, often involving financial investments, purchasing assets, or funding new business ventures.

Saving Incentives

Financial or regulatory measures designed to encourage individuals or businesses to save more money.