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According to the new classical school of thought, a continually increasing money supply
causes ____.
A) the aggregate demand curve to shift continually to the right, and the price level to increase
continually
B) the aggregate supply curve to shift continually to the right, and the price level to increase
continually
C) the long-run aggregate supply curve to shift continually to the right, and the price level to
increase continually
D) both B and C of the above
Answer: A
Diff: 2 Type: MC Page Ref: 695
Skill: Applied
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
In the new classical model, an anticipated policy of a continually increasing money supply
causes ____.
A) the aggregate demand curve to shift right along a stationary aggregate supply curve, leading
to continually increasing aggregate output and prices
B) the aggregate supply curve to shift left along a stationary aggregate demand curve, leading to
continually contracting aggregate output and prices
C) the aggregate demand curve to shift continually to the right while simultaneously the
aggregate supply curve shifts continually inward, leading to higher and higher price levels
D) the aggregate demand curve to shift continually to the left while simultaneously the aggregate
supply curve shifts continually outward, leading to higher and higher price levels
Answer: C
Diff: 3 Type: MC Page Ref: 695
Skill: Applied
Objective List: 25.1 Discern between activist and non-activists views on monetary policy
In the new classical model, an unanticipated increase in the money supply causes ____.
A) the aggregate demand curve to shift to the right along a stationary aggregate supply curve
B) both the aggregate demand and supply curves to shift simultaneously to the right
C) the aggregate demand curve to shift to the right as the aggregate supply curve simultaneously
shifts to the left
D) both the aggregate demand and supply curves to shift simultaneously to the left
Answer: A
Diff: 3 Type: MC Page Ref: 695
Skill: Recall
Objective List: 25.1 Discern between activist and non-activists views on monetary policy