In a World Where the Price Level Could Adjust Immediately

question 56

Multiple Choice

In a world where the price level could adjust immediately to its new long-run level after a money supply increase

• A)The dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising.
• B)The dollar interest rate would fall because prices would adjust immediately and prevent the money supply from rising.
• C)The dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing.
• D)The dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing.
• E)The dollar interest rate would fall because prices would not be able to prevent the money supply from rising.

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Definitions:

Operation Of Law

Changes in legal status or rights due to the application of law, rather than as a result of an agreement or court order.

Flower Pots

Containers used for planting, growing, and displaying flowers and other plants, made from various materials.

Catharsis

A process of releasing, and thereby providing relief from, strong or repressed emotions, often through art, drama, or conversation.

Displacement

A defense mechanism where the mind substitutes either a new aim or a new object for goals felt in their original form to be dangerous or unacceptable.