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Author Question: If an increase in the level of money supply leads to a proportionate increase in prices with no ... (Read 68 times)

ts19998

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on: Jun 30, 2018
If an increase in the level of money supply leads to a proportionate increase in prices with no effect on real variables ,we say that
 
  A) the Fisher relationship holds.
  B) money is neutral.
  C) money is superneutral.
  D) money is a medium of exchange.

Question 2

What is the meaning of animal spirits? How do these relate to planned investment spending and to unplanned investment spending?
 
  What will be an ideal response?


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uniquea123

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Reply #1 on: Jun 30, 2018
Answer to Question 1

B

Answer to Question 2

Animal spirits are emotional waves of optimism and pessimism. They influence autonomous investment, changing the amount of planned investment at any real interest rate. They impact unplanned investment, as well, since each firm's planned investment expenditures are, typically, purchases from other firms. A sudden change from optimism to pessimism will leave businesses with unsold inventory, an increase in inventory investment. Unplanned negative inventory investment results from a change from pessimism to optimism.


ts19998

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Reply #2 on: Jun 30, 2018
Thank you :)


uniquea123

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Reply #3 on: Jun 30, 2018
Happy to help you


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