A positive temporary supply side shock will:
A. increase the level of potential output in the long run.
B. decrease the price level in the long run.
C. increase the price level in the long run.
D. have no effect in the long run.
Answer: D
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A consumption-based theory of the determination of the real interest rate is based on the assumption that: a. a rise in the real interest rate will increase current consumption
b. the real interest rate must adjust to make people willing to experience changing consumption levels over time. c. the real interest rate is determined by the supply and demand for investment and is therefore unaffected by consumption decisions. d. the real interest rate must be positive.
In order for the banking system to expand the money supply with a money multiplier effect, all of the money loaned out
a. has to have been demand deposits at some bank b. has to stay in one bank c. by one bank has to be deposited in the same bank d. has to be repaid before the multiplier process can work e. has to equal the amount of legal reserves for the banking system