The Economy Is in the Horizontal Portion of the AS Curve,investment

question 74

Multiple Choice

The economy is in the horizontal portion of the AS curve,investment spending is interest insensitive and there is no liquidity trap.According to the Keynesian transmission mechanism,if the money supply increases the interest rate will __________,investment spending will __________,the AD curve will __________,and Real GDP will __________.

• A) fall; fall; left; fall
• B) rise; drop; left; fall
• C) fall; remain unchanged; not shift; not change
• D) rise; remain unchanged; not shift; not change
• E) none of the above

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Definitions:

Stock Price

indicates the current price at which a share of a company can be bought or sold on a stock exchange.

Issue Value

The price at which a new issue of securities is offered for sale to the public or the nominal value of a security at the time of its issuance.

Zero

A numerical value representing nothing or the absence of any quantity.

American Call Option

A financial contract that gives the holder the right, but not the obligation, to buy a specified asset at a certain price before the option expires.