If the Money Supply Is Fixed,increases in the Price Level

question 63

Multiple Choice

If the money supply is fixed,increases in the price level

• A) raise the purchasing power of the money supply and increase the amount people spend.
• B) reduce the average money cost of each transaction, thus lowering total spending.
• C) reduce interest rates; thus, the cost of borrowing money falls, leading to more consumption and investment.
• D) raise the incentive for people to spend on big-ticket items such as appliances, automobiles, and houses.
• E) increase the size of the money balances people want in order to maintain the real value of their purchases, thus causing interest rates to rise.

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Definitions:

Labor

The work performed by humans that is used in the production of goods and services.

Equivalent Units

Equivalent units, in managerial accounting, are a concept used in process costing that represents the amount of work done during a period in terms of fully completed units of output.

Materials Costs

The expenses associated with the raw materials used in the production of goods.

Work In Process

Inventory that includes all materials, labor, and overhead costs incurred for products that are in the production process.