In the Short Run, an Unanticipated Increase in the Money

question 13

Multiple Choice

In the short run, an unanticipated increase in the money supply will exert its primary impact on

• A) output and employment rather than on prices.
• B) prices; output and employment will be largely unaffected.
• C) interest rates; rising interest rates will stimulate additional saving.
• D) prices, if the economy operates at an output level below its long-run supply constraint.

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Definitions:

Credit Cost Curve

A graphical representation showing the relationship between the cost of credit (interest rates) and the amount of credit available in the market.

Carrying Costs

Carrying costs are the expenses associated with holding inventory, including storage, insurance, and spoilage, among others.

Opportunity Costs

Forgoing possible benefits from different choices when selecting a specific option.

Credit Instrument

A document or agreement that serves as evidence of a debt or credit relationship, facilitating the extension of credit.