The Direct Effect of an Increase in the Money Supply

question 189

Multiple Choice

The direct effect of an increase in the money supply is

• A) people will spend the extra money, causing the aggregate demand curve to shift to the right and prices to rise, and causing the economy to go into recession.
• B) people will save the money, causing an increase in bank deposits, causing interest rates to fall, and loans to expand.
• C) people will save more money, causing a decrease in economic activity and a fall in prices.
• D) people will spend the extra money, causing the aggregate demand curve to shift to the right, creating an increase in economic activity.

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Definitions:

Moratorium

A period of delay or suspension of an activity or a law. In psychology, it often refers to a time during adolescence when adult responsibilities are postponed as the individual explores various commitments.

Identity Achievement

Erikson’s term for the attainment of identity, or the point at which a person understands who they are as a unique individual, in accord with past experiences and future plans.

Bicultural Identity

The combination of identifying with and integrating aspects of two different cultures.

Psychosocial Development

A domain of development that involves changes in how individuals understand themselves and others, including emotions, personality, and social interactions.