Starting from a Position of Macroeconomic Equilibrium at the Full-Employment

question 110

Multiple Choice

Starting from a position of macroeconomic equilibrium at the full-employment level of real GDP, in the short run, an unanticipated decrease in the money supply will:

• A)​raise real interest rates, lower the price level, and reduce real GDP.
• B)​raise real interest rates, lower the price level, and leave real GDP unchanged.
• C)​raise nominal interest rates, lower the price level, and leave real GDP unchanged.
• D)​lower real interest rates, raise the price level, and increase real GDP.

---

Definitions:

Ischium

One of the three bones that make up the pelvis, helping to form the hip joint and bear the weight of the body in the sitting position.

Perfectly Inelastic

Describes a situation in which the quantity demanded or supplied does not change in response to a change in price.

Relatively Inelastic

Relatively inelastic refers to a situation where the demand for a good or service changes little when its price changes; the percentage change in demand is smaller than the percentage change in price.

Perfectly Elastic

This term describes a situation in market economics where the quantity demanded or supplied responds infinitely to changes in price.