Suppose That an Economy Is Initially Producing at the Full-Employment

question 137

Multiple Choice

Suppose that an economy is initially producing at the full-employment level of output. Now suppose there is a reduction in the money supply. Other things being equal we can expect

• A) supply-side inflation.
• B) demand-side inflation.
• C) cost-pull inflation.
• D) deflation.

---

Definitions:

Entrepreneurs

Individuals who start, organize, and manage their own businesses, taking on financial risks in the hope of profit.

Small Business Owners

Individuals who own and operate companies that are typically defined by their small size in terms of employees and revenue.

General Public

This term refers to the ordinary people in society at large, distinct from the members of a particular group, profession, or government.

Moderate Risk

A level of danger or potential for loss that is considered to be within a reasonable or manageable range.