According to Friedman, a decrease in expected inflation would not affect the demand for money if the _____ fell by the same amount.
A) return on stocks
B) return on bonds
C) return on money
D) none of the above

Question

Quizplus · Accepted Answer

According to Friedman, a decrease in expected inflation would not affect the demand for money if the return on money fell by the same amount. This is because the demand for money is influenced by the relative return of holding money compared to other assets. If the return on money decreases in line with expected inflation, the incentive to hold money versus other assets remains unchanged.

According to Friedman, a Decrease in Expected Inflation Would Not