Starting from a Position of Macroeconomic Equilibrium at Below the Full-Employment

question 59

Multiple Choice

Starting from a position of macroeconomic equilibrium at below the full-employment level of real GDP, an increase in the money supply will:

• A) raise interest rates, prices, and reduce real GDP.
• B) raise interest rates, lower prices, and leave real GDP unchanged.
• C) Raise interest rates, lower prices, and leave real GDP unchanged.
• D) lower interest rates, raise prices, and increase real GDP.

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Definitions:

Variable Overhead

Indirect operating costs that vary with the level of production activity, such as utilities and materials.

Direct Labor

The wages or salaries paid to employees who are directly involved in producing goods or services.

Direct Materials

The raw materials that can be directly traced to the manufacturing of a product and are considered a variable cost.