In the Liquidity-Preference Model, a Decrease in the Money Supply

question 64

Multiple Choice

In the liquidity-preference model, a decrease in the money supply causes

• A)the nominal interest rate to increase and the equilibrium quantity of money to decrease.
• B)the nominal interest rate to increase and the equilibrium quantity of money to remain unchanged.
• C)the nominal interest rate to decrease and the equilibrium quantity of money to remain unchanged.
• D)both the nominal interest rate and the equilibrium quantity of money to decrease.

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Definitions:

Overhead Costs

Indirect costs incurred during the production process or in the performance of services, not directly tied to a specific product or service.

Activity Cost Pools

Groupings of individual costs, typically by department or activity, used in activity-based costing to allocate costs to products or services.

Time-Driven

A method or approach that relies on time as the main factor to drive processes, activities, or costing.

Activity-Based Costing

A costing method that assigns costs to products or services based on the activities they require, aiming to provide more accurate cost information.