Under the Assumptions of the Fisher Effect and Monetary Neutrality,if

question 140

Multiple Choice

Under the assumptions of the Fisher effect and monetary neutrality,if the money supply growth rate falls,then

• A)both the nominal and the real interest rate fall.
• B)neither the nominal nor the real interest rate fall.
• C)the nominal interest rate falls,but the real interest rate does not.
• D)the real interest rate falls,but the nominal interest rate does not.

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Definitions:

Central Planning

An economic system in which decisions about production, investment, and distribution are made by a central authority, often the government.

Capital Goods

Long-lasting goods acquired by firms for producing goods and services, including machinery, buildings, and equipment.

Market System

An economic system where the allocation of resources and the distribution of goods and services are determined by supply and demand in a free market.