Milton Friedman Called the Response of Lower Interest Rates Resulting

question 27

Multiple Choice

Milton Friedman called the response of lower interest rates resulting from an increase in the money supply the ________ effect.

• A)liquidity
• B)price level
• C)expected-inflation
• D)income

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Definitions:

Input Decrease

A reduction in the amount, quality, or efficiency of any raw material, capital, or labor used in the production process.

Derived Demand

Demand for a factor of production or good that results from the demand for another related good or service.

Substitution Effect

The change in consumption patterns due to a shift in relative prices that makes one product more economically attractive than another.

Output Effect

The output effect refers to the impact changes in production volume have on a company's total costs and profitability.