Asked by Ayesha Tariq on May 22, 2024
Verified
Increases in the money supply will cause demand for investment and consumption goods to _______ in the short run and cause prices to ________ in the long run.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; hold steady
E) be unaffected; be unaffected
Money Supply
The total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.
Investment
The allocation of resources, such as capital or time, with the expectation of generating an income or profit.
Consumption Goods
Products and services that are used by individuals for personal enjoyment and satisfaction, not for further production.
- Acquaint yourself with the instruments of monetary policy and their utilization.
- Examine how interest rates are related to business investment and consumer expenditure.
Verified Answer
TC
Tomeka ChurchMay 24, 2024
Final Answer :
A
Explanation :
Increases in the money supply typically lead to increased demand for investment and consumption goods in the short run as more money is available for spending. In the long run, this increased demand can lead to higher prices due to inflationary pressures.
Learning Objectives
- Acquaint yourself with the instruments of monetary policy and their utilization.
- Examine how interest rates are related to business investment and consumer expenditure.