Suppose there is an increase in the money supply, but that people's demand for money balances increases by a greater amount at the same time. The net effect would be
A) lower interest rates, greater real GDP, and a higher price level as aggregate demand increases because of the indirect effect of the increase in the money supply.
B) no change in aggregate demand or aggregate supply.
C) a lower price level in the long run.
D) an increase in aggregate demand due to the increase in the money supply, but a decrease in aggregate supply due to the increase in the demand for money.
C
You might also like to view...
The spectrum of market structures, aligned from the least to the greatest number of firms, spans
a. monopoly to duopoly b. monopoly to oligopoly c. monopoly to triopoly d. monopoly to perfect competition e. monopolistic competition to oligopoly
Given the characteristics: (1) many buyers and sellers, (2) free entry and exit, (3) perfect information, and (4) heterogeneity of products, monopolistic competition and perfect competition share
a. (1) and (4). b. (1), (2), and (3). c. (2) and (4). d. (2), (3), and (4).