Use the Following to Answer Questions

question 262

Multiple Choice

Use the following to answer questions:
Figure: Short-Run Determination of the Interest Rate
-(Figure: Short-Run Determination of the Interest Rate) Look at the figure Short-Run Determination of the Interest Rate. If the money supply is at MS₁ and the Fed conducts expansionary monetary policy, in the short run the interest rate drops to r₂. In the long run prices will _____ the demand for money.

• A)decrease, decreasing
• B)decrease, increasing
• C)increase, decreasing
• D)increase, increasing

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Definitions:

Agricultural Adjustment Agency

A New Deal agency in the United States created in 1933 to boost agricultural prices by reducing surpluses, primarily through paying farmers to reduce crop area.

George C. Marshall

An American military leader, statesman, and Nobel Peace Prize laureate who played a significant role in World War II and formulated the Marshall Plan for European recovery post-war.

European Recovery Plan

Also known as the Marshall Plan; an American initiative passed in 1948 for foreign aid to Western Europe, aimed at rebuilding European economies after the end of World War II.