If Real Money Demand Doubles While the Nominal Money Supply

question 96

Multiple Choice

If real money demand doubles while the nominal money supply 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:

Average Total Cost Curve

A graphical representation showing how the average total cost of production changes as the quantity of output changes.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, allowing firms to make adjustments and leading to a situation where economic profit equals zero.

Just Tangent To

A condition where two curves meet at only one point without intersecting, often used in the context of optimizing problems.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing to buy at each price.