The Substitution Effect and the Output Effect Work in the Same

question 126

Multiple Choice

The substitution effect and the output effect work in the same direction.

• A)work in the same direction.
• B)work in opposite directions.
• C)are independent of one another,having nothing in common.
• D)None of these choices are correct.

---

Definitions:

Open-Market Sales

Transactions where central banks sell securities in the open market to control the supply of money.

Treasury Securities

Debt instruments issued by the government to finance its expenditures, including bills, notes, and bonds.

Money Supply

The sum total of economic assets in monetary form at a specific time.

U.S. Treasury Bills

Short-term government securities issued by the United States Department of the Treasury with maturity periods typically less than a year, considered low-risk investments.