Use the Following to Answer Questions

question 66

Multiple Choice

Use the following to answer questions .
Exhibit: Monetary Policy and Rational Expectations
-(Exhibit: Monetary Policy and Rational Expectations) Suppose the economy is operating at point a. Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at

• A) d. They rationally adjust their behavior and the aggregate demand curve shifts to the left and d becomes the new equilibrium point.
• B) b. They rationally adjust their behavior and the aggregate demand curve shifts to the left and b becomes the new equilibrium point.
• C) d. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point.
• D) c. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point.

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Definitions:

Master Budget

An integrated financial plan that includes all of the individual budgets related to sales, cost of goods sold, operations, inventory, and financing.

Credit Sales

Sales made by a business that are not paid for at the time of purchase but are charged to the customer's account to be paid for at a later date.

Production Budget

A production budget estimates the number of units that must be produced during a specific period to meet sales and inventory needs.

Ending Inventory

The total value of all unsold goods that a company has in its possession at the end of a reporting period, important for calculating cost of goods sold.