In a Model with Sticky Prices, a Positive Monetary Shock

question 46

Multiple Choice

In a model with sticky prices, a positive monetary shock would cause households:

• A)to spend more to try to get rid of the excess money.
• B)to want to hold more money.
• C)to change optimal real money balances.
• D)all of the above.

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Definitions:

Inventory

Items held for sale in the ordinary course of business, or materials and supplies used or consumed in the production process.

Accounts Payable

Money owed by a company to its creditors or suppliers for goods and services received but not yet paid for.

Income Tax Expense

The cost incurred by businesses or individuals due to taxes on their income.

Income Taxes Payable

The amount of income tax a company owes to the government but has not yet paid.