According to the Tenets of Monetary Theory, Which of the Following

question 53

Multiple Choice

According to the tenets of monetary theory, which of the following is a prescription for reducing inflation?

• A) If less money is available, price increases will slow and the inflationary spiral will end.
• B) Credit can be eased by lowering interest rates, thus allowing the supply of money to grow quickly.
• C) Increased federal spending will spur economic expansion, reduce unemployment, and increase personal spending.
• D) Reduced federal taxes will give consumers more buying power.

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Definitions:

Price Elasticity

A measure in economics to show how the quantity demanded of a good or service responds to a change in its price.

Marginal Cost

The additional expenditure required to produce one more unit of a product or service.

Profit-Maximizing

The strategy or practice of adjusting production and distribution to achieve the highest possible profit from operations.

Marginal Revenue Function

A calculation that shows how much extra revenue a firm will receive from selling one more unit of a product or service.