If the Nominal Money Supply Doubles While Real Money Demand

question 58

Multiple Choice

If the nominal money supply doubles while real money demand is unchanged,what happens to the price level?

• A)The price level increases by a factor of four.
• B)The price level doubles.
• C)The price level is unchanged.
• D)The price level falls by one-half.

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Definitions:

Variable Costs

Expenses that fluctuate with the level of output or production activity.

Profit

The financial gain realized when the revenue from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Cost of Capital

The minimum profit rate a business needs to generate from its investments to keep its market value stable and draw in financing.

Cash Flows

The cumulative sum of funds moving in and out of a company, particularly influencing its ability to cover short-term obligations.