Asked by Katia Mejia on May 12, 2024
Verified
Which of the following can a country increase in the long run by increasing its money growth rate?
A) The nominal wage
B) Real output
C) Real interest rates
D) The real wage
Money Growth Rate
The rate at which the total amount of money in an economy grows over a specific period, often considered a factor influencing inflation.
Nominal Wage
The wage paid to workers measured in current money terms, without adjustment for inflation.
Real Output
The total value of all goods and services produced in an economy, adjusted for price changes or inflation.
- Illustrate how inflation, the pace of money supply growth, and nominal and real variables are interrelated over an extended period.
Verified Answer
AB
Alfredo BlankMay 17, 2024
Final Answer :
A
Explanation :
Increasing the money growth rate can lead to inflation, which in turn can increase nominal wages as workers demand higher pay to keep up with rising prices. However, it does not necessarily increase real output, real interest rates, or real wages in the long run, as these are influenced by real factors such as productivity, technology, and preferences.
Learning Objectives
- Illustrate how inflation, the pace of money supply growth, and nominal and real variables are interrelated over an extended period.