Friedman and Schwarz Argue That Money Is Not Neutral Because

question 93

Multiple Choice

Friedman and Schwarz argue that money is not neutral because

• A)theoretical models of the economy don't show monetary neutrality.
• B)money is a leading, procyclical variable.
• C)they found several historical incidents in which changes in the money supply were not responses to macroeconomic conditions, and output moved in the same direction as money.
• D)they found no evidence that productivity changes or changes in government spending contributed to business cycles; only monetary changes preceded every recession.

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Definitions:

Real Price

Price of a good relative to an aggregate measure of prices; price adjusted for inflation.

Supply Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity of that good or service that a seller is willing and able to supply, usually depicted as upward sloping.

Real Price

The price of a good or service after adjusting for inflation, reflecting its true purchasing power over time.

Annual Consumption

The total amount of goods and services consumed by an individual, household, or economy in a one-year period.