Figure 21-2

question 264

Multiple Choice

Figure 21-2. On the left-hand graph, MS represents the supply of money and MD represents the demand for money; on the right-hand graph, AD represents aggregate demand. The usual quantities are measured along the axes of both graphs.
-Refer to Figure 21-2. Assume the money market is always in equilibrium, and suppose r₁ = 0.08; r₂ = 0.12; Y₁ = 13,000; Y₂ = 10,000; P₁ = 1.0; and P₂ = 1.2. Which of the following statements is correct?

• A)When r = r₂, nominal output is higher than it is when r = r₁.
• B)When r = r₂, real output is higher than it is when r = r₁.
• C)When r = r₂, the expected rate of inflation is higher than it is when r = r₁.
• D)If the velocity of money is 4 when r = r₂, then the quantity of money is $3,000.

---

Definitions:

Federal Reporter

A series of law books that contain the official reports of decisions and opinions from federal courts.

United States Reports

The official record of the rulings, orders, case tables, and other proceedings of the Supreme Court of the United States.

Judicial Opinion

A formal statement by a court or a judge explaining the reasoning behind a decision made in a case.

Slip Opinion

A judicial opinion published shortly after the decision is made and not yet included in a case reporter or advance sheets.