According to the quantity theory of money, in the long run
A) an increase in the quantity of money creates an increase the price level but no increase in real GDP.
B) the quantity of money in the economy will always be just the right amount.
C) an increase in the quantity of money creates an increase in the price level and in real GDP.
D) None of the above answers are correct.
A
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Many disagreements among economists result because:
A) economists deal only with positive economics. B) economists sometimes make normative judgments. C) economics is a social science. D) economics deals so much with theories and models.
Describe how a lender can lose during inflation if the inflation is unanticipated and the loan is a fixed-interest-rate loan. How would a variable-interest-rate loan (one that adjusts over the contract period) eliminate these loses?
What will be an ideal response?