Which of the Following Is True About the Long Run

question 78

Multiple Choice

Which of the following is true about the long run effects of a contractionary monetary policy in Keynesian model?

• A)Output declines,price level declines,real interest rate rises.
• B)Output increases,price level increases,real interest rate declines.
• C)Output does not change,price level decreases,real interest rate does not change.
• D)Output declines,price level declines,real interest rate declines.

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Definitions:

Profit-Maximizing Firm

A business whose primary objective is to achieve the highest possible profits through its operations and investments.

Market Share

The part of the market under the control of a specific company or product.

Kinked Demand Curve

A theory in economics suggesting that prices for a product have a tendency to stay stable because competitors will match price decreases but not price increases.

Administered Prices

Prices that are set by an authority, such as a government or agency, rather than being determined by market forces.