Starting from the Natural Level of Output, an Unexpected Monetary

question 32

Multiple Choice

Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to ______ in the short run; and in the long run the expected price level will ______, causing the level of output to return to the natural level.

• A) increase; increase
• B) increase; decrease
• C) decrease; decrease
• D) decrease; increase

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Definitions:

Fixed Costs

Fixed expenditures that are unaffected by changes in production or sales volumes, like rent, wages, and insurance costs.

Marginal Cost

The cost incurred by producing one additional unit of a good or service.

Crafters Fair

An event where artisans and craftspeople showcase and sell their handmade goods, often featuring a variety of unique items.

Marginal Costs

The additional cost incurred in producing one more unit of a product or service.