According to proponents of the interest-rate-based monetary policy transmission mechanism, any increase in the money supply
A) causes velocity to increase, and so in the short run nominal Gross Domestic Product (GDP) must increase.
B) will increase Gross Domestic Product (GDP) only if interest rates fall and investment is sensitive to decreasing interest rates.
C) is effective in increasing Gross Domestic Product (GDP) only if it causes an outward shift of the aggregate supply curve.
D) will move the economy from the "liquidity trap" during times of recession if interest rates fall enough to stimulate private investment.
B
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Refer to the scenario above. Which of the following will happen if the equilibrium price charged by the firm in the short run is $130?
A) The firm will earn positive economic profits and continue production. B) The firm will incur a loss but continue production. C) New firms will enter the industry in the long run. D) All firms will incur losses in the long run.
Refute the claim by mercantilists who claimed that without severe restrictions on international trade and payments, a country might find itself impoverished and without an adequate supply of circulating monetary gold as a result of balance of
payments deficits.