Use the Following to Answer Questions

question 64

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 the demand for money will _____, and the interest rate will_____.

• A)increase; increase to r₁
• B)increase; remain at r₂
• C)decrease; decrease below r₂
• D)decrease; remain at r₂

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Definitions:

Industries

Broad sectors of the economy categorized according to their primary business activities, such as technology, healthcare, or finance.

Depreciation

The systematic allocation of the cost of a physical or tangible asset over its useful life, reflecting the asset's consumption or wear and tear.

Indirect Expense

Costs that are not directly linked to the production of goods or services but are necessary for the business's operations, such as utilities and rent.

Building

A structure used or intended for supporting or sheltering any use or continuous occupancy.