Starting from a Position of Macroeconomic Equilibrium at the Full-Employment

question 170

Multiple Choice

Starting from a position of macroeconomic equilibrium at the full-employment level of real GDP, in the short run an unanticipated increase in the money supply will

• A) raise real interest rates, lower prices, and reduce real GDP.
• B) raise real interest rates, lower prices, and leave real GDP unchanged.
• C) raise nominal interest rates, lower prices, and leave real GDP unchanged.
• D) lower real interest rates, raise prices, and increase real GDP.

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Definitions:

Optimal Quantity

The amount of a good or service that maximizes the net benefit to an individual or society, often considering factors like cost and utility.

Utility-maximizing Consumer

An economic concept where consumers aim to get the greatest utility or satisfaction from their purchases given their budget constraints.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, unlike normal goods, where demand increases with rising income.

Demand Curves

Graphs that show the relationship between the price of a product and the quantity of the product demanded.