The Economic Response to the Overnight Reduction in the French

question 99

Multiple Choice

The economic response to the overnight reduction in the French money supply by 20 percent in 1724,

• A) confirmed the neutrality of money because no real variables were affected by this nominal change.
• B) confirmed the quantity theory by leading to an immediate 20 percent reduction in the price level.
• C) confirmed that money is not neutral in the short run because both output and prices dropped.
• D) contradicted Okun's law because decreases in output were not associated with increases in unemployment.

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