The Observed Correlation Between the Price Level and Real GDP

question 45

Multiple Choice

The observed correlation between the price level and real GDP may be low because

• A) consumption is procyclical.
• B) the central bank acts to target the price level.
• C) money demand does not depend on income.
• D) money demand increases when the nominal interest rate rises.
• E) Milton Friedman has passed away.

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Definitions:

Informational Returns

Tax documents used to report certain types of transactions to the IRS, including income, interest, dividends, but not directly tax-deductible amounts.

Straight-Line Method

A method of calculating depreciation for accounting purposes, allocating a uniform expense amount to each year of an asset's useful life.

Depreciated

A decrease in the value of an asset over time, often due to wear and tear or obsolescence, which can be used for tax deductions.

Primarily Personal Property

Items or assets that are mainly used for personal, non-business purposes, which may include vehicles, furniture, and electronics.