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.

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