Refer to the Graph Above

question 62

Multiple Choice

Refer to the graph above. If the interest rate rises from 2 percent to 3 percent, the supply of money must have:

• A) Decreased by $50 billion
• B) Decreased by $100 billion
• C) Decreased by $150 billion
• D) Increased by $50 billion

---

Definitions:

Simple Spending Multiplier

The ratio of a change in output to a change in autonomous spending that caused it, illustrating the impact of fiscal policy on total economic output.

Simple Spending Multiplier

A formula used in economics to determine the impact of a change in autonomous spending on the aggregate output, highlighting the amplification of initial spending through the economy.

Marginal Propensity

The ratio of change in an economic variable (such as consumption or saving) in response to a change in another (such as income), indicating the responsiveness of the variable.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, often used to measure inflation.