According to the Monetarist Theory

question 46

Multiple Choice

According to the monetarist theory

• A) an increase in the money supply will affect output and the price level in the long run.
• B) a decrease in the money supply will increase interest rates as portfolios rebalance, leading to a drop in investment and/or consumption spending.
• C) the velocity of money is highly unstable.
• D) an increase in the money supply will affect only output in the long run.

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Definitions:

Projections and Estimates

Forward-looking statements about future financial performance, often based on assumptions or expectations.

Prime Costs

The direct costs of manufacturing a product, specifically direct materials and direct labor.

Direct Materials

Raw materials that can be directly traced to the manufacturing of a product and are considered a variable cost.

Direct Labor

The cost of wages paid to workers directly involved in the production of goods or provision of services.