In the Short Run, When the Central Bank Increases the Quantity

question 25

Multiple Choice

In the short run, when the central bank increases the quantity of money, what happens to real balances?

• A) They do not change, since prices will rise by the same proportion.
• B) They will fall, since prices will rise by a greater proportion.
• C) They will rise, since prices overall will fall.
• D) They will rise, since prices will not change in the short run.

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Definitions:

Work in Process

Partially finished goods that are still in the production process at the end of an accounting period.

Direct Labor Costs

Expenses that can be directly traced to the production of specific goods or services, including wages and benefits of workers involved in production.

Raw Materials

Basic substances in their natural, modified, or semi-processed states used as inputs for production.

Standard Cost System

An accounting method that uses cost standards for material, labor, and overhead charges to control costs and assess operational efficiency.