If the Short-Run Aggregate Supply Curve Is Horizontal, And, If

question 73

Multiple Choice

If the short-run aggregate supply curve is horizontal, and, if each member of the general public chooses to hold a larger fraction of his or her income as cash balances, then:

• A) output and employment will increase in the short run.
• B) output and employment will decrease in the short run.
• C) prices will increase in the short run.
• D) prices will decrease in the short run.

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Definitions:

Natural Capital

The world's stocks of natural assets including geology, soil, air, water and all living organisms.

Pollution Cleanup Costs

The expenses associated with removing pollutants from the environment and restoring natural conditions.

Social Costs

The total cost to society due to an activity or industry, including both direct costs and indirect effects on the environment and human health.

Optimal Level

The most favorable or efficient point or degree of a particular process or condition.