In Response to a Financial Liquidity Shortage,if the Central Bank

question 32

Multiple Choice

In response to a financial liquidity shortage,if the central bank increases the money supply,

• A) aggregate demand shifts to the right, correcting the liquidity shortage.
• B) output increases and the price level remains constant.
• C) output increases and the price level increases.
• D) aggregate demand shifts further left, exacerbating the problem.
• E) aggregate supply shifts right, offsetting the decrease in aggregate demand.

---

Definitions:

Market for Corn

The economic market where corn is bought and sold, with its price determined by the principles of supply and demand.

Price

The amount of money required to purchase a good or service.

Quantity Supplied

Represents the amount of a good or service that producers are willing and able to sell at a given price over a specified period.

Demand and Supply Increases

A situation where both the demand and supply for a good or service rise, affecting its market equilibrium.