1 - Which of the following cannot be the cause of a continuous increase in the price level? A) increase in the nominal money supply B) Increase in aggregate demand C) Increase in the velocity of circulation of money D) increase in aggregate supply E) Supply shock
1 - Which of the following cannot be the cause of a continuous increase in the
A) increase in the nominal money supply
B) Increase in aggregate
C) Increase in the velocity of circulation of money
D) increase in
E) Supply shock
Answer: D) increase in aggregate supply
A) An increase in the nominal money supply leads to an increase in the purchasing power of people thus demand more goods and services thus it would lead to rising in the price level.
B) An increase in the price level can because due to the consistent rise in the aggregate demand, increase in the aggregate demand leads and less increase in aggregate supply leads to increase in the price level/
C) An increase in the velocity of circulation of money means the level of transaction in the economy has been increasing, therefore it would lead to a continuous increase in the price level.
E) Supply shock can lead to a sudden increase in the price level or a sudden decrease in the price level due to internal and external reasons but it cannot be a consistent reason for rising in the price level.
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