With a Vertical LM Curve,an Increase in the Money Supply

question 53

Multiple Choice

With a vertical LM curve,an increase in the money supply can be matched by an equal increase in money demand only through ________,which causes monetary policy to be particularly ________.

• A)a rise in income,strong
• B)a rise in income,weak
• C)a fall in the interest rate,strong
• D)a fall in the interest rate,weak

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Definitions:

Total Fixed Costs

Costs that do not vary with the level of output or sales in the short term, including expenses such as rent, salaries, and insurance.

Profit-seeking

The pursuit of activities that are expected to result in financial gain or increased profitability.

Profit-maximizing Output

The level of production at which a company can achieve the highest level of profit given its costs and the market price of its product.

Competitive Firm

A business that operates in a market where it has numerous competitors and cannot set prices but rather accepts market prices.