Early Keynesians Concluded That Changes in Monetary Policy Had No

question 18

Multiple Choice

Early Keynesians concluded that changes in monetary policy had no impact on aggregate output because early empirical studies found no linkage between movements in ________ and ________.

• A)nominal interest rates;investment spending
• B)real interest rates;investment spending
• C)money supply;aggregate output
• D)investment spending;aggregate output

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Definitions:

Marginal Cost

The sum required to produce an extra unit of a product or service.

Variable Input

An input in the production process that can be adjusted in the short run to change the level of output, such as labor hours or raw materials.

Marginal Cost

The investment required to manufacture one more unit of a product or service.

Diminishing Marginal Returns

A principle stating that as one factor of production increases, while others stay constant, the additional output will eventually decline.