Suppose you hold 50 to buy groceries weekly and then the price of groceries increases by 5 percent. To be able to buy the same amount of groceries, what must happen to your nominal money holdings?
A) They must increase by 5.
B) They can decrease by 5.
C) They must increase by 2.50.
D) They must increase, but the amount of the increase depends on income.
Question 2
In the above figure, point A represents
A) a recessionary gap.
B) a full-employment equilibrium.
C) an inflationary gap.
D) an increase in aggregate demand.
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