Why don't classical economists or monetarists advocate increasing the money supply in order to raise real GDP?
These economists believe that the economy already operates at full-employment GDP. Therefore, even
though they think than an increase in the money supply will lead to lower interest rates that will spur
investment and increase aggregate demand, they believe that the main result of this type of monetary
intervention will be inflation, since an increase in real production cannot occur.
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Darryl runs a ranch in Jackson, Wyoming. The interest on the debt he incurred to buy his ranch totals $3,000 per year. For Darryl, the interest is
A) an implicit cost. B) an explicit cost. C) his normal cost. D) his normal profit. E) part of his economic profit.
Which of the following statements accurately describes the two measures of the money supply?
A) The two measures do not move together, so they cannot be used interchangeably by policymakers. B) The two measures' movements closely parallel each other, even on a month-to-month basis. C) Short-run movements in the money supply are extremely reliable. D) M2 is the narrowest measure the Fed reports.