In a model with money neutrality, a 10% increase in the money supply leads to an increase of prices by

A) more than 10%.
B) 10%.
C) less than 10%, but more than zero.
D) zero.

B

Economics

You might also like to view...

Along the 45° reference line

A) the average propensity to consume is represented. B) planned real expenditures equal real disposable income. C) consumption expenditures equal saving. D) the relationship between consumption and income is represented.

Economics

Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy. Which of the following is NOT one of these lessons?

A) Rising interest rates indicate a tightening of monetary policy, whereas falling interest rates indicate an easing of monetary policy. B) Monetary policy can be highly effective in reviving a weak economy even if short-term interest rates are already near zero. C) Avoiding unanticipated fluctuations in the price level is an important objective of monetary policy, thus providing a rationale for price stability as the primary long-run goal for monetary policy. D) Other asset prices beside those on short-term debt instruments do not contain important information about the stance of monetary policy because they are important elements in various monetary policy transmission mechanisms.

Economics