Suppose There Is an Increase in the Money Supply, with Velocity

question 21

Multiple Choice

Suppose there is an increase in the money supply, with velocity and real GDP constant.According to the equation of exchange, which of the following variables will likely increase?  

• A) net exports 
• B) the price level 
• C) interest rates 
• D) the value of Canadian dollar

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Definitions:

Allocative Efficiency

An economic state where resources are allocated in a way that maximizes the overall utility to society, ensuring that the goods and services produced match consumer preferences.

Minimization

The process or strategy of reducing or keeping to a minimum the size, amount, or degree of something, especially costs or liabilities.

Product Mix

The total range of products or services offered by a company to its customers.

Increasing-Cost Industry

An industry in which the costs of production increase as the industry grows and decreases as it contracts.