If the Monetary Authorities Decide to Increase the Nominal Money

question 11

Multiple Choice

If the monetary authorities decide to increase the nominal money supply by 10% when the economy is at its full-employment level of output, in the long run the aggregate price level increases by _____% and real GDP _____.

• A) 10; increases by 10%
• B) 5; increases by 5%, according to Okun's law
• C) 10; returns to the potential level of output
• D) 5; increases by 20%, given a marginal propensity to consume of 0.5

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Definitions:

Plasmodium Vivax

A species of protozoan parasite responsible for a type of malaria, characterized by recurring fevers and anemia.

Life Cycle

The series of stages through which a living organism passes from the start of its life until it reproduces.

Malaria

Disease caused by the protozoan Plasmodium vivax; transmitted by the Anopheles mosquito.

Fungi

A kingdom of organisms that includes molds, yeasts, and mushrooms, which live by decomposing and absorbing the organic material in which they grow.