According to the Monetary Rule,for Price Stability Given Real Growth

question 115

Multiple Choice

According to the monetary rule,for price stability given real growth in the economy of 3 percent annually,the money supply should

• A)decrease 1% each year.
• B)decrease 3% each year.
• C)increase 1% each year.
• D)increase 3% each year.
• E)not change from year to year.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, leading to a stable market condition.

Equilibrium Quantity

The quantity of goods or services supplied is equal to the quantity demanded at the market equilibrium price.

Demand Increases

A situation wherein there is a rise in the quantity of a product or service sought after by consumers at a given price level.

Equilibrium Price

The price level at which the amount of products available for sale matches the amount consumers want to buy.