In the Long Run, How Does an Increase in the Rate

question 178

Multiple Choice

In the long run, how does an increase in the rate of growth of the money supply shift the Phillips curves?

• A)It shifts both the short-run and long-run Phillips curves to the right.
• B)It shifts both the short-run and long-run Phillips curves to the left.
• C)It shifts only the short-run Phillips curve to the right.
• D)It shifts only the short-run Phillips curve to the left.

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Definitions:

Consumption Rate

The proportion of income or resources that is spent on consumption rather than saving.

Savings Rate

The proportion of disposable income that is saved rather than spent on consumption, typically expressed as a percentage.

Credit Cards

Financial instruments issued by banks or financial institutions that allow cardholders to borrow funds with which to pay for goods and services with the obligation to pay back the borrowed money, plus any applicable interest.

Permanent Income Hypothesis

A theory suggesting that people's consumption choices are based on their long-term income expectations rather than their current income.