Figure 24-2

question 320

Multiple Choice

Figure 24-2.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.

-Refer to Figure 24-2.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?

• A) When r = r₂,nominal output is higher than it is when r = r₁.
• B) When r = r₂,real output is higher than it is when r = r₁.
• C) When r = r₂,the expected rate of inflation is higher than it is when r = r₁.
• D) If the velocity of money is 4 when r = r₂,then the quantity of money is $3,000.

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Definitions:

Schemes

In cognitive development, structured patterns of thought or behavior that individuals use to make sense of their experiences, often evolving with new information.

Cognition

The mental action or process of acquiring knowledge and understanding through thought, experience, and the senses, encompassing processes such as memory, judgment, and problem-solving.

Reflexes

Involuntary responses or actions that are automatic and occur without conscious thought in reaction to specific stimuli.

Conservation Skills

The cognitive ability to understand that quantity remains the same despite changes in shape or appearance, typically developing in early childhood.