Which of the following statements is true?
A)In a static model, an economy is assumed to start at a point where all variables are constant.
B)In the dynamic model of money, the longer prices take to adjust to shocks, the more longlived is the liquidity effect.
C)In the dynamic model of money, all variables are initially growing at an increasing rate but they eventually reach a steady state.
D)Money supply is the only endogenous variable in the dynamic model of money.

Question

Which of the following statements is true?
A)​In a static model, an economy is assumed to start at a point where all variables are constant.
B)​In the dynamic model of money, the longer prices take to adjust to shocks, the more long­lived is the liquidity effect.
C)​In the dynamic model of money, all variables are initially growing at an increasing rate but they eventually reach a steady state.
D)​Money supply is the only endogenous variable in the dynamic model of money.

Quizplus · Accepted Answer

In the dynamic model of money, the longer prices take to adjust to shocks, the more persistent is the liquidity effect. Option A is not true; in a static model, an economy is assumed to start at a point where all variables have fixed values, not necessarily constant. Option C is not true; the economy may experience cycles of growth and recession in a dynamic model. Option D is not correct; other variables, such as interest rates and output, are also endogenous in the dynamic model of money.

Which of the Following Statements Is True