Figure 34-2

question 389

Multiple Choice

Figure 34-2. On the left-hand graph, MS represents the supply of money and MD represents the demand for money; on the right-hand graph, AD represents aggregate demand. The usual quantities are measured along the axes of both graphs.

-Refer to Figure 34-2. Assume the money market is always in equilibrium, and suppose r1 = 0.08; r2 = 0.12; Y1 = 13,000; Y2 = 10,000; P1 = 1.0; and P2 = 1.2. Which of the following statements is correct? When P = P2,

• A) investment is lower than it is when P = P1.
• B) nominal output is higher than it is when P = P1.
• C) the expected rate of inflation is higher than it is when P = P1.
• D) the velocity of money is higher than it is when P = P1.

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Definitions:

Abolitionists

People who advocated for the immediate end of slavery and the emancipation of slaves, primarily active in the 18th and 19th centuries.

Mental Expectations

The beliefs or forecasts an individual holds about future outcomes or behaviors.

Taste

A sense that detects the flavor of substances, including sweetness, sourness, bitterness, saltiness, and umami, through taste buds on the tongue.

Psychokinesis

The claimed paranormal ability to move or manipulate objects with the mind without physical interaction.