Using the Money Demand and Money Supply Model,an Increase in Money

question 228

Multiple Choice

Using the money demand and money supply model,an increase in money demand would cause the equilibrium interest rate to

• A)decrease.
• B)increase.
• C)not change.
• D)increase,then decrease.

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Definitions:

GDP Price Index

A measure that reflects changes in the price level of all goods and services included in the Gross Domestic Product, used to calculate real GDP.

Inflation

The pace at which overall prices for goods and services increase, gradually diminishing the value of money.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, often measured by consumer price indices.

Net Increase

The amount by which something grows or goes up, calculated by taking total gains and subtracting any losses.