If There Is a Temporary Increase in the Money Supply

question 80

Multiple Choice

If there is a temporary increase in the money supply in the Eurozone, ceteris paribus, what is the result for the United States?

• A) The money supply in the United States must decrease by the same proportion.
• B) The U.S. dollar nominal interest rate will increase, as the euro rate is unchanged.
• C) Long-run expectations shift to expect a stronger euro.
• D) The dollar appreciates against the euro.

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Definitions:

Rational Choice Theory

A framework for understanding economic and societal behavior, positing that individuals act based on their preferences and rational calculations to maximize benefit or utility.

Interacting Individuals

Interacting individuals refer to the process where two or more people communicate or affect each other’s behavior and thoughts.

Benefits

Various forms of support, often from the government, in the form of cash or services, intended to ensure the welfare and protection of citizens or employees.

Rational Choice

A theory in economics and sociology that explains decisions by individuals as based on the attempt to maximize personal advantage, minimizing disadvantages.