Professor Milton Friedman stated that "inflation is a monetary phenomenon." What did he mean by this statement and what is the basis for this assertion?
What will be an ideal response?
Professor Friedman meant that the source of inflation is money growth. His assertion is based on Fisher's quantity theory of money, which basically assumes that real GDP growth is zero, (determined by real economic resources and production technology) and that the velocity of money is constant (%? V = 0), since it is determined by institutional factors that are slow to change or can be viewed as constant over a short period of time. With these assumptions then the % ? M has to equal the % ?P, or the growth rate of the money supply will translate to the rate of inflation.
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A) Switzerland B) United Kingdom C) Germany D) None of the above nations spend more on healthcare.
During World War I (1914–18), hourly wages
(a) decreased in nominal and real terms. (b) increased in nominal and real terms. (c) increased in nominal terms but decreased in real terms. (d) decreased in nominal terms but increased in real terms.
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b. U.S. Mint. c. International Trade Administration. d. Federal Bureau of Investigation. e. Comptroller of the Currency.
After hiring a new employee, a manager finds that the total output has increased. When the manager hires another employee however, he realizes that although the total production has increased, the increment is less than the previous case. This is the result of:
a. diseconomies of scale. b. a general economic downturn. c. diminishing marginal returns. d. the lack of skills of the two new employees. e. constant returns to scale.