Most Economists Believe That in the Long Run,changes in the Money

question 18

Multiple Choice

Most economists believe that in the long run,changes in the money supply

• A)affect nominal but not real variables.This view that money is ultimately neutral is consistent with classical theory.
• B)affect nominal but not real variables.This view that money is ultimately neutral is inconsistent with classical theory.
• C)affect real but not nominal variables.This view that money is ultimately neutral is consistent with classical theory.
• D)affect real but not nominal variables.This view that money is ultimately neutral is inconsistent with classical theory.

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Definitions:

Dividend Irrelevance Theory

A theory suggesting that dividend policy has no effect on a company's value or its stock price.

Firm's Value

The total monetary value of a company, typically assessed through metrics like market capitalization, enterprise value, or net asset value.

Cost of Capital

The rate of return that a company must earn on its project investments to maintain its market value and attract funds.

Dividend Irrelevance Theory

The Dividend Irrelevance Theory posits that a company's dividend policy does not affect its market value or shareholders' wealth in perfect markets.