Under a System of Flexible Exchange Rates, Monetary Expansion Is

question 21

Multiple Choice

Under a system of flexible exchange rates, monetary expansion is entirely neutral in the long run.In other words, the long-run effect of monetary expansion is that

• A)nominal money supply, prices, and the nominal exchange rate all increase proportionally
• B)real money balances are not affected
• C)relative prices, including the real exchange rate, are not affected
• D)real output and the level of unemployment are not affected
• E)all of the above

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Definitions:

Behavioral Economics

The study of how psychological, social, cognitive, and emotional factors affect economic decisions and the implications for market prices, returns, and resource allocation.

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Behavioral Economist

An economist who studies the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.

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The process by which an individual selects among alternative choices based on preferences, resources, and information.