Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. The quantity of physical capital The level of technological knowledge The size of the labor force The inflation rate

The size of labor force

The inflation rate

The level of technological knowledge

Explanation:

In the long run the economy's real Gross Domestic Product depends on labor force, capital, natural resources and technological knowledge. The level of physical quantity is not affected by the money supply in the long run. This will have affects in short run only. In the long run only nominal prices are impacted and production or physical quantity has no impacts.

All the above will change with the increase of money supply by the government in any market.

Explanation:

Usually, government will up the supply of money in the market to help the economy and decelerate recession.

When it usually, does this through the Central Bank by increasing the reserves of the commercial banks and dropping interbank interest rate.

This, among other monetary policy measures, increases lending by the commercial banks to real sector businesses.

Then A (Increased Capital) is achieved.

As the process continues, businesses take advantage of the relatively cheap funds to expand their operations by investing the funds. As they expand their operations

C) - Expansion of labor is achieved.

In some cases, the expansion causes the importation or adoption of newer technology especially in the manufacturing sector. Technology is one sure way to cut costs, increase efficiency and effectiveness. Companies would normally carryout this strategy to gain advantage in the market.

So you find that:

B) Technical Knowledge is also achieved.

When the Federal government wants to carryout an expansionary monetary policy, it also increases it's own level of spending.

Government usually is the largest employer of labour, the largest contractor and by extension the largest supplier of money in the economy.

Increasing money supply therefore leads to increase in effective demand.

Effective demand, according to the laws of economics, always causes supply to increase. Before supply responds, price changes first by going in the exact direction of Demand. When this happens,

D) Price Inflation is created

Cheers!

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

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