A rise in the price level ________ the buying power of money and ________ the quantity of real GDP demanded
A) does not affect; does not change
B) raises; decreases
C) does not affect; increases
D) lowers; decreases
E) lowers; increases
D
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Banks in the Diamond-Dybvig model can offer depositors increased liquidity because
A) both individual depositors' liquidity needs and average depositor liquidity needs are predictable. B) while individual depositors' liquidity needs are unpredictable, average depositor liquidity needs are predictable. C) while individual depositors' liquidity needs are predictable, average depositor liquidity needs are unpredictable. D) neither individual depositors' liquidity needs nor average depositor liquidity needs are predictable.
If the Federal Reserve increases the legal reserve requirement on deposits,
a. the money stock will rise and the money multiplier will fall. b. the monetary base will rise and the money multiplier will fall. c. both the monetary base and the money stock will fall. d. neither the monetary base nor the money stock will rise.