In the Long Run, the Key Reason That Money Is

question 43

Multiple Choice

In the long run, the key reason that money is neutral is that

• A)the federal budget is balanced.
• B)prices are flexible.
• C)business cycles have become much milder.
• D)the nominal interest rate must equal the real interest rate.

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Definitions:

Elastic

Describes a situation in which the demand or supply of a product is sensitive to changes in price, meaning a small change in price leads to a large change in the quantity demanded or supplied.

Supply Curve

A graphical representation of the relationship between the price of a good and the quantity of the good supplied.

Demand Curve

A graphical representation showing the inverse relationship between the price of a good or service and the quantity demanded by consumers.

Demand

The desire and ability of consumers to purchase goods and services at given price levels.