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

---

Definitions:

Temperature

A measure of the average kinetic energy of the particles in a system, related to the concept of heat.

°C

Degrees Celsius, a scale and unit of measurement for temperature where 0°C is the freezing point of water and 100°C is the boiling point at sea level.

Volume

Volume is a measure of the three-dimensional space occupied by a substance or enclosed within a container, expressed in cubic units.

Temperature

Temperature is a physical quantity reflecting the thermal energy of an object or system, indicative of the degree of heat or coldness measurable by a thermometer.