If Consumption Depends Positively on the Level of Real Balances

question 106

Multiple Choice

If consumption depends positively on the level of real balances and real balances depend negatively on the nominal interest rate in a neoclassical model, then the nominal interest rate:

• A) declines when the money growth rate rises.
• B) is unchanged when the money growth rate rises.
• C) rises 1 percent for each 1 percent rise in the money growth rate.
• D) rises less than 1 percent for each 1 percent rise in the money growth rate.

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Definitions:

Kidney

An organ in vertebrates that is essential for removing waste products from the blood and regulating blood pressure, electrolyte balance, and red blood cell production.

Acidity

A measure of the concentration of hydrogen ions in a solution, often determining the sourness or sharpness of taste.

Urine

A liquid by-product of metabolism in the bodies of many animals, including humans, expelled through the urethra.

Starvation

A severe deficiency in caloric energy, nutrient, and vitamin intake, leading to extreme suffering or even death.