Suppose the Real Interest Rate Is 4% and the Expected

question 32

Multiple Choice

Suppose the real interest rate is 4% and the expected inflation rate is 3%.If the money supply increases by 10% and output,the real interest rate,and the expected inflation rate are unchanged,then the price level increases by

• A)3%.
• B)4%.
• C)7%.
• D)10%.

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Definitions:

Behavior

Actions or reactions of an individual in response to external or internal stimuli.

Months

The twelve named periods into which a year is divided.

Constructive Alternativism

The idea that we are free to revise or replace our constructs with alternatives as needed.

Freedom

The power or right to act, speak, or think as one wants without hindrance or restraint; often considered a fundamental human right.