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

question 1

Multiple Choice

Assume a starting position of macroeconomic equilibrium at the full-employment level of real GDP.In the short run,what effect will a decrease in the money supply have?

• A)It will lower real interest rates, raise the price level, and increase real GDP.
• B)It will raise real interest rates, lower the price level, and leave real GDP unchanged.
• C)It will raise nominal interest rates, lower the price level, and leave real GDP unchanged.
• D)It will raise real interest rates, lower the price level, and reduce real GDP.

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Definitions:

Recession

A quick phase of economic reduction, where industrial and trade dynamics slow down, typically delineated by a GDP decrease in two consecutive quarters.

Civil War

A war between groups within the same country or state, often stemming from political, social, or ethnic differences.

Worst Recession

Refers to the most severe period of economic decline during which trade and industrial activity are reduced, typically recognized by a fall in GDP in successive quarters.

World War II

A global conflict that lasted from 1939 to 1945, involving many of the world’s nations, and marked by significant events like the Holocaust and the use of atomic bombs.