If the Demand for Money Depends on the Interest Rate

question 26

Multiple Choice

If the demand for money depends on the interest rate, then a 15% increase in the money supply will increase

• A) nominal GDP by 15%.
• B) nominal GDP by less than 15%.
• C) nominal GDP by more than 30%.
• D) real GDP by 30%.

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Definitions:

Economic Models

Simplified representations of complex economic processes, designed to help understand how the economy functions and predict future economic behavior.

Resource Allocation

The process of distributing available resources among various competing needs or uses in order to achieve a desired outcome or optimize efficiency.

Comparative Advantage

An economic theory stating that a country should specialise in producing and exporting goods in which it has a lower opportunity cost than other countries.

Opportunity Cost

Opportunity cost refers to the value of the next best alternative foregone as the result of making a decision.