Question

If money is non-neutral in the short-run, what might explain an increase in growth? Select one:...

If money is non-neutral in the short-run, what might explain an increase in growth?

Select one:

A. unexpected inflation increases

B. anticipated unemployment decreases

C. anticipated inflation increases

D. None of the answers is correct.

In the shortrun, what happens to the economy when consumer spending decreases in the New Keynesian model?

Select one:

A. Inflation is higher and the real growth rate is lower.

B. Inflation is lower and the real growth rate is lower.

C. Inflation is lower and the real growth rate is higher.

D. Inflation is higher and the real growth rate is higher.

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Homework Answers

Answer #1

Answer 1

D part is correct answer. Because if money is neutral it will effect economy in short run and not in long run. As the case in above question is non neutrality of money in short run then none of the first three options of question suits.

Answer 2

Option B is correct ( inflation is lower and real growth rate is lower). If consumer spending decreases in the economy then according to New Keynesian model AD will decrease which will be the cause of deflation and low growth rate.

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