Suppose That Monetary Neutrality and the Fisher Effect Both Hold

question 91

Multiple Choice

Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases

• A)the inflation rate and the nominal interest rate by the same number of percentage points.
• B)nominal interest rates but by less than the percentage point increase in the inflation rate.
• C)the inflation rate but not the nominal interest.
• D)neither the inflation rate nor the nominal interest rate.

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Pertaining to an investment with guaranteed returns and negligible risk of financial loss.

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Profits or losses calculated by considering both explicit costs, such as direct expenses, and implicit costs, like opportunity costs.

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The opportunity to buy an asset at a low price in one market and sell it for a higher price in another, exploiting price discrepancies.

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