Suppose There Is an Increase in the Money Supply, but That

question 150

Multiple Choice

Suppose there is an increase in the money supply, but that people's demand for money balances increases by a greater amount at the same time. The net effect would be

• A) a lower price level in the long run.
• B) no change in aggregate demand or aggregate supply.
• C) an increase in aggregate demand due to the increase in the money supply, but a decrease in aggregate supply due to the increase in the demand for money.
• D) lower interest rates, greater real GDP, and a higher price level as aggregate demand increases because of the indirect effect of the increase in the money supply.

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Definitions:

Post-closing Trial Balance

A list of all company accounts that remain after year-end closing entries have been made, used to verify the balance of debits and credits.

Financial Statements

Structured reports of an entity's financial activities and condition, including the balance sheet, income statement, statement of cash flows, and statement of changes in equity.

Permanent Accounts

Accounts that carry their ending balances over into the next accounting period and are not closed out, such as assets, liabilities, and equity accounts.

Balance Sheet

A document depicting a corporation’s financial standing at a particular instant, outlining its assets, debts, and owner's equity.