If Money Is Neutral

question 3

Multiple Choice

If money is neutral,

• A)an increase in the money supply does nothing.
• B)a change in the money supply only affects real variables such as real output.
• C)a change in the money supply reduces velocity proportionately; therefore there is no effect on either prices or real output.
• D)a change in the money supply only affects nominal variables such as prices and wages.
• E)the money supply cannot be changed because it is tied to a commodity such as gold.

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Definitions:

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated as the net profit divided by the cost of the investment.

Selling Price

The price at which a product or service is sold to the consumer.

Inventory

The total amount of goods or materials held in stock by a business or organization for the purpose of resale or production.

Cost of Goods Sold

The direct expenses related to the production or purchase of products a company sells.