Stability in production (output stability) is the reduction of periodic fluctuations in GDP and maintaining economic growth rate close to the long-term average.

Correct answer is C.

The Harrod-Domar model relates economic growth to the nation’s savings rate and hence to the capital stock.

Expansionary monetary policy (increasing money supply) shifts the aggregate demand curve to the right, and therefore, price level and output increase.

Economic growth is simply defined as the percentage increase in the value of economic activity from a period to another period of time. Generally, the time period is taken as quarterly, semi-annually and annually in the calculations of the changes in economic activity. For the measurement of the value of the economic activity, generally the gross domestic product (GDP) of the country is used as a proxy. The GDP is defined as the market value of all final goods and services produced within a country in a given period of time, say, in a year. So, if we want to define the economic growth of a country annually, we say that the economic growth is the percentage change in GDP of a country from a year to another year. The economic growth can be positive or negative. If the change in GDP from a year to another year is positive, we say that the economic growth is positive or there is an economic expansion.

Autarky is the absence of international trade.

Aggregate demand is the total amount of goods and services demanded at various price levels by all sectors in an economy (households, firms, government, and external world). The total amount of these goods and services is measured by real income or real GDP.

Fiat money is the object which has no value as a good but has a value in purchasing goods and services.

The marginal product of capital is the change in output produced that results in one unit increase (change) in the capital stock.

Increase in input fees is one of the factors effecting decrease in aggregate supply.

The factor that causes the decrease of the production amount when the general level of prices increases in the economy is the interest rate. The interest rate influences the planned aggregate expenditures, thus causing the production level to be determined. For this reason, the real sector and the monetary sector are in equilibrium at every point on the aggregate demand curve.

The increase in the money supply plays an important role in the emergence of demand-pull inflation as well as the consistent inflation. For example, let’s assume that an expansionary fiscal policy has been followed by an increase in government expenditure while money supply is constant. The fact that the money supply remains constant in the face of the increase in government expenditures suggests that the central bank does not accommodate to the expansionary fiscal policy. The increase in government expenditures will cause the aggregate demand curve to shift to the right and the prices will increase.

Aggregate demand curve is the curve that shows the relationship between general price level and production level.

In obtaining the aggregate demand curve, we have assumed that the variables of the economic policy that the government use are fixed. Changes resulting from government expenditure (G), taxation (T) and money supply (MS) due to monetary and fiscal policy decisions cause the aggregate demand curve to shift.

The aggregate demand curve shifts to the right to indicate that aggregate demand increases when government expenditure increases, money supply increases, and taxes decrease. The shift of the aggregate demand curve to the left is a matter of decreasing public spending and money supply, increasing taxes.

There are four basic actors in a country’s financial system: Central bank, financial intermediaries (banks etc.), savers and investors. Among them, the most important one is the central bank with its functions.

Commodity money is the object which has a value when used as goods and which can also be used as medium of exchange. The best example of commodity money is gold. Gold has been used as means of payment to purchase goods and services for centuries; gold also has a value in other usage areas as a good. For instance, gold is being used as jewelry or ornaments for centuries, as well as a means of payment.

The definiton fits the term “price stability”.

Serving as a Medium of Exchange: The first function of money is to be a medium of exchange. Economic units exchange goods and services on hand with money, and use this money to buy goods and services they want. Money, as a medium of exchange, is a kind of tool simplifying and accelerating exchange process of goods and services.

Production possibilities frontier (PPF) is the boundary between those combinations of commodities and services that can be produced and those that cannot.