Ceteris paribus, what would happen to real money balances if all prices, including input prices (incomes) and output prices, doubled tomorrow?
A) Nominal money balances would double to 2M, the nominal price index would double to 2P, and real money balances would approximately double.
B) Real money balances would double to 2M, the nominal price index would approximately triple to 3P, and nominal money balances would remain the same.
C) Real money balances would double to 2M, the nominal price index would double to 2P, and the nominal money balances would double.
D) Nominal money balances would remain the same, the overall price level would double to 2P, and real money balances would fall to one-half their previous amount, M/2P.
Correct Answer:
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Q4: The _ is a theory of the
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Q7: Real Income is best defined as
A)nominal income
Q8: Nominal Income is best defined as
A)real income
Q10: Household demand for real money balances increases
Q11: Household demand for real money balances decreases
Q12: Household demand for real money balances decreases
Q13: The supply of real money balances increases
Q14: The supply of real money balances decreases
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