A Doubling of the Nominal Money Supply Would Create a New

question 3

Multiple Choice

A doubling of the nominal money supply would create a new AD curve at double the vertical position of the original AD curve because

• A)at each price level there is a decrease in autonomous spending.
• B)each output level requires the same real money supply as in the original situation.
• C)the rise in money supply causes increased expectation of further price increases and investment declines.
• D)the rise in the money supply causes an excess supply of money and generates rising interest rates.

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Definitions:

Investment

The action of dispensing resources, often capital, with a view towards gaining profit or income.

College Education

College education is the stage of learning that occurs at universities and colleges, often leading to an undergraduate or graduate degree.

Compounded Monthly

A method of calculating interest where the interest is added to the principal each month, resulting in interest being calculated on a progressively larger base each period.

Equivalent Amount

An equivalent amount refers to a value that has the same worth or value as another in a different form or denomination.