According to the Monetarists, Which of the Following Is True

question 201

Multiple Choice

According to the monetarists, which of the following is true?

• A) Instability in the money supply is the primary cause of economic instability.
• B) A reduction in the money supply will cause consumers to increase spending.
• C) A reduction in the money supply will cause a proportional reduction in wages and prices, leaving output unchanged.
• D) A rapid growth rate of the money supply will lead to a rapid growth rate of real GDP.

Distinguish between heuristics and biases in decision-making.

Acknowledge the role of creativity and innovation in decision-making.

Recognize the importance of evaluating decision outcomes and the process for doing so.

Understand the concept of escalating commitment and its implications in decision-making.

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Definitions:

Risk-Free Return

The theoretical return on an investment with zero risk, typically associated with government bonds.

Jensen's Measure

A performance evaluation tool that measures the excess return of a portfolio above the expected return, accounting for risk.

Risk-Free Return

The theoretical return on an investment with zero risk, typically represented by government securities like Treasury bills.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates higher than market volatility.