Figure 34-2

question 96

Multiple Choice

Figure 34-2.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.
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-Refer to Figure 34-2.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:

Electromagnetic Spectrum

The range of all types of electromagnetic radiation, from radio waves to gamma rays, including visible light.

Nanometers

A unit of length in the metric system, equal to one billionth of a meter, commonly used to measure wavelengths of light and the scale of atoms and molecules.

Depth Perception

The visual ability to perceive the world in three dimensions, enabling the estimation of distances.

Two-dimensional

Pertaining to something having both length and width but no depth, or pertaining to analysis or representation on a plane or flat surface.