The money supply in the fictitious nation

Assignment Help Business Economics

Reference no: EM13995938

For the last several years, the money supply in the fictitious nation of Mauritania has been rising by 10% annually, and inflation has been running at 8%. The central bank is going to cut growth of the money supply back to 3% annually. Which of the following statements regarding the effects of this action is true, ceteris paribus?

A. According to the quantity theory of money, inflation will be 1% in the next year.

B. According to the quantity theory of money, economic growth will slow down.

C. If the assumption of rational expectations holds, output will fall by 10% in the next year.

D. If the assumption of adaptive expectations holds, there will be no effect on output in the following year.

E. None of the above

Reference no: EM13995938

Questions Cloud

Explain its effect on the ppc of the indian economy and why : Unemployment is reduced due to the measures taken by the government like education for all . Explain its effect on the ppc of the Indian economy and why?

Under a strict command-and-control framework : Under a strict command-and-control framework, suppose abatement standards are set equally across polluters. Assume the total abatement target is 30 units. Show the cost implications using three graphs, each of a different polluter with a unique MAC c..

What central bank try to accomplish by reducing policy rate : The diagram below depicts the overnight rates targeted by the Bank of Canada in recent years. What was the central bank trying to accomplish by reducing the policy rate during the economic recession which lasted from the fourth quarter of 2008 to t..

Which of the following is not found in the epigastric region : Which of the following sets of directional terms are most appropriately referred to as opposites?

The money supply in the fictitious nation : For the last several years, the money supply in the fictitious nation of Mauritania has been rising by 10% annually, and inflation has been running at 8%. The central bank is going to cut growth of the money supply back to 3% annually. Which of the f..

The war affect germanys production possibilities curve : During the Second World War, Germany's factories were decimated. It also suffered many human casualties, both soldiers and civilians. How did the war affect Germany's production possibilities curve?

Demonstrate specific skills and competencies : "Performance assessments call upon the examinee to demonstrate specific skills and competencies, that is, to apply the skills and knowledge they have mastered.

Cyclical unemployment is high : Which of the following is true if cyclical unemployment is high?

Briefly explain why firms that pursue cost leadership : Briefly explain why firms that pursue cost leadership or diffentiation achieve returns that are about equivalent, have higher returns, and firms that are stuck in the middle have the lowest returns?

User Account

All Pages