Which of the Following Is the Most Accurate Description of Events

question 154

Multiple Choice

Which of the following is the most accurate description of events when monetary authorities increase the size of commercial banks' excess reserves?

• A) A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employment.
• B) A rise in interest rates increases the money supply, causing a decrease in investment spending, output, and employment.
• C) The money supply is decreased, which increases the interest rate and causes investment spending, output, and employment to decrease.
• D) The money supply is increased, which decreases the interest rate and causes investment spending, output, and employment to increase.

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Definitions:

Marginal Revenue Product

measures the increase in revenue that results from the addition of one more unit of input while holding all other inputs constant.

Equilibrium

A state in a market where the quantity demanded by consumers equals the quantity supplied by producers, leading to a stable price.

MPs

Members of Parliament, elected officials who represent constituencies and have legislative responsibilities in the national government.

Purely Competitive Conditions

A market structure characterized by many buyers and sellers, where each seller offers an identical product, leading to price taken as given by individual sellers due to the market's competition.