The Structure of the Short-Run Model Is Best Described as Which

question 5

Multiple Choice

The structure of the short-run model is best described as which of the following?

• A) Nominal interest rate \(\rightarrow\) Real interest rate \(\rightarrow\) Short-run output \(\rightarrow\) Change in inflation
• B) Nominal interest rate \(\rightarrow\) Real interest rate \(\rightarrow\) Change in inflation
• C) Nominal interest rate \(\rightarrow\) Short-run output \(\rightarrow\) Change in inflation
• D) Real interest rate \(\rightarrow\) Short-run output \(\rightarrow\) Change in inflation \(\rightarrow\) Nominal interest rate
• E) Short-run output \(\rightarrow\) Change in inflation \[\rightarrow\] Real interest rate \[\rightarrow\] Nominal interest rate

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Definitions:

Inventories

Goods and materials that a business holds for the ultimate goal of resale or processing in the production cycle.

Marginal Efficiency

Marginal efficiency is the rate of return on an investment project or the profitability of investing in additional units of a good or service.

Capital

Capital refers to financial assets or the financial value of assets, such as funds held in deposit accounts, as well as the physical factors of production – namely, machinery, buildings, and land.

Expected Profit Rate

The forecasted rate of return on an investment or business venture, based on estimated earnings.