In the Medium Run,an Increase in Inflation Causes

question 47

Multiple Choice

In the medium run,an increase in inflation causes

• A)an increase in the opportunity cost of holding money.
• B)a reduction in the opportunity cost of holding money.
• C)no change in the opportunity cost of holding money.
• D)individuals to switch from holding bonds to money and increase their real money balances.

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Definitions:

Surplus

The situation in which the quantity of goods produced exceeds the quantity of goods demanded. Surpluses can result in price drops for products or services, reflecting a mismatch in supply and demand.

Price Ceiling

A cap set by authorities on the maximum price for a good or service, aimed at safeguarding consumers.

Price Floor

A minimum price set by the government or other agency, below which a product cannot legally be sold.

Shortage

A situation where the demand for a product or service exceeds the supply available.