The Short-Run Effect of an Increase in the Supply of Money

question 111

Multiple Choice

The short-run effect of an increase in the supply of money is

• A) an increase in both real Gross Domestic Product (GDP) and the price level.
• B) an increase in the price level but not in real Gross Domestic Product (GDP).
• C) an increase in real Gross Domestic Product (GDP) but not in the price level.
• D) an increase in the price level, a decrease in real Gross Domestic Product (GDP), but an increase in nominal national income.

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Definitions:

Absolute Value

A numerical value without regard to its sign, symbolized as |x|, representing the distance of a number on the number line from the origin.

Percentage Change

Percentage change is a mathematical calculation that shows how much a specific number has increased or decreased, expressed as a percentage of its previous value.

Cross-price Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good, represented as a ratio.

Complements

Goods or services that are used together, where the consumption of one enhances the use or value of the other.