A Set of Combinations of Nominal Interest Rates and GDP

question 59

Multiple Choice

A set of combinations of nominal interest rates and GDP, for which the demand for money is equal to the supply of money, is the:

• A) IS curve.
• B) aggregate expenditure line.
• C) supply curve.
• D) LM curve.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of individuals or the economy increases, opposite to what is observed with a normal good.

Law of Supply

It states that, all else equal, an increase in the price of a good or service will lead to an increase in the quantity supplied.

Law of Demand

An economic principle stating that the quantity demanded of a good decreases as its price increases, all else being equal, and vice versa.

Diminishing Marginal Utility

Diminishing marginal utility is the principle stating that as a person consumes more of a good, the satisfaction gained from consuming each additional unit decreases.