Suppose We Are at a Long-Run Equilibrium Point in an AD-AS

question 18

Multiple Choice

Suppose we are at a long-run equilibrium point in an AD-AS model.Then the money supply falls.In the short run,is there any difference between what happens in the simple quantity theory of money (SQTM) version and the monetarist version of the model?

• A) There is no difference.
• B) In the SQTM version,the price level falls; in the monetarist version,it does not.
• C) In the monetarist version,Real GDP falls; in the SQTM version,it does not.
• D) In the monetarist version,the price level falls; in the SQTM version,it does not.
• E) In the SQTM version,Real GDP falls; in the monetarist version,it does not.

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Definitions:

Material Cost

The total cost associated with the raw materials and components used in manufacturing a product.

Hourly Wage

A rate of pay based on the number of hours worked, distinct from salary pay which is fixed regardless of hours worked.

Excess Inventory

Inventory that exceeds the optimal level, often leading to additional storage costs and potential obsolescence.

Aggregate Plan

A strategic framework used in production and operations management to determine the necessary production levels, inventory, and workforce to meet anticipated demand.