Money Neutrality Flashcards
1
Q
Money is Neutral
A
changes in stock of money affect nominal but not real variable
2
Q
if money is neutral, role of Central bank is…
A
diminished
3
Q
government finances nominal spending by
A
- Levying nominal lump-sum taxes
- Issuing nominal debt
- Raising nominal seigniorage
4
Q
key to breaking the neutrality of money
A
expectations
5
Q
debt to GDP ratio _____ with the level of deficit
A
increases
6
Q
every major depression in the US is associated with ______
A
a contraction in the money supply
7
Q
money is _____ in the long run
A
neutral
8
Q
in the short run, money supply…
A
could possibly have real economic implications
9
Q
nominal value unit of measurement
A
dollars
10
Q
real value unit of measurement
A
consumption goods
11
Q
relationship between real interest rate and nominal interest rate
A
real interest rate is the nominal interest rate less inflation
