The Most Likely Short-Run Impact of an Unanticipated Increase in the Money

question 75

Multiple Choice

The most likely short-run impact of an unanticipated increase in the money supply is a(n) :

• A)increase in the real interest rate, which in turn stimulates investment and GDP.
• B)decrease in the real interest rate, which in turn stimulates investment and GDP.
• C)decrease in real output, which causes the real interest rate to decline stimulating investment and GDP
• D)increase in real output, which causes the real interest rate to decline.
• E)increase in cost of borrowing finds from the banks, leading to a decrease in the level of investment.

---

Definitions:

Police Power

The capacity of a state to regulate behaviors and enforce order within its territory, mainly in areas concerning health, safety, and morals.

General Revenue Sharing

A form of federal monetary aid that is given to states and municipalities with minimal restrictions on how it can be spent.

Means Testing

A procedure to determine eligibility for certain forms of financial aid or social services based on the income and assets of an applicant.

Indexing

The practice of adjusting financial figures or static amounts by a designated benchmark or index to reflect changes in economic indicators.