Figure 21-2

question 185

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? When P = P₂,

• A)investment is lower than it is when P = P₁.
• B)nominal output is higher than it is when P = P_1.
• C)the expected rate of inflation is higher than it is when P = P₁.
• D)the velocity of money is higher than it is when P = P₁.

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Definitions:

Nonmonetary Characteristics

Features or attributes of goods, services, or job positions that do not have a direct monetary value or financial aspect.

Labor Markets

Economic platforms where workers find paying work, employers find willing workers, and wage rates are determined.

Labor Supply

The total hours that workers are willing and able to work at a given wage rate, in a given time period.

Labor Demand

The total amount of workers that employers are willing and able to hire at a given wage rate within an economy.