If resource owners anticipated a monetary growth rate of 6 percent, but the money supply actually grew at only 2 percent, then _____
A) real wages would fall.
B) output would decrease.
C) output would remain unchanged.
D) output would increase, but only if nominal wages increased more rapidly than prices.
E) the expected inflation rate was less than the actual rate.

Question

Quizplus · Accepted Answer

If the money supply grows at a slower rate than resource owners anticipate, it can lead to a decrease in spending and investment, which in turn can cause output to decrease. This is because the actual inflation rate would be lower than expected, leading to higher real interest rates and reduced spending.

If Resource Owners Anticipated a Monetary Growth Rate of 6