E A Money Figure 2: Money Market Demand 37, Refer to Figure: 2. A movement from

Question

E A Money Figure 2: Money Market Demand 37, Refer to Figure: 2. A movement from Point A to Point C ean be caused by 37, A. an increase in nominal aggregate output. CB an increase in the interest rate. C. a decrease in the interest rate. D. a decrease in income. 38. Refer to Figure: 2. A movement from Point D to Point E can be caused by A. an inerease in the interest rate. B: a decrease in the interest rate, C: a decrease in nominal aggregate output. Dran increase in income 39. The GDP deflator is the A. price index used for the wholesale market. B. difference between GDP and national income. C. broadest-based price index available. DR index used to measure deflation but not inflation. 40. In order for a barter transaction to be successful, there must be a 40. double coincidence of wants. B. federal tax law in effect. C. market for the goods. D. high demand for a certain item. Midterm 2 Page 7 of 12

Explanation / Answer

38> A decrease in nominal aggregate otput.

Reason

Here the interest rate is remaining constant as they are on the same horizontal line but E has lesser money demand than D, it can be because there is lesser output produced or there is a lesser income and thus the demand for money declines.

39>  the broadest-based price

Reason

The GDP deflator is the broadest-based price index available-it is considered by many to be the best overall indicator of inflationary pressures in an economy. It is the ratio of the nominal and real GDP.

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