What is the basic problem with the monetary assumption when there has been significant inflation?

Expert Solution

The basic problem with the monetary assumption when there has been significant inflation is that the monetary assumption assumes a stable dollar in terms of purchasing power. When there has been inflation, the dollar has not been stable in terms of purchasing power, and therefore, dollars are being compared that are not of the same purchasing power.

Monetary assumption fails in significant inflation, assuming stable dollar purchasing power, leading to incomparable values.

Junaid answered 8 months ago

What is the monetary unit assumption?

Stating that inflation is purely a monetary phenomenon can generate controversy. Inflation arises when the money...

Stating that inflation is purely a monetary phenomenon can generate controversy. Inflation arises when the money supply is increased relative to the demand for money. Could the real interest rate be negative in practice? How about the nominal interest rate?

What assumption makes it ok to assume the market prediction for inflation is the best guess.

What is fiscal and monetary policy? Who implements these policies? Suppose a country has high inflation....

What is fiscal and monetary policy? Who implements these policies? Suppose a country has high inflation. What kind of fiscal and monetary policy do you suggest? Explain why.

CMR- Introduction to Marketing 1. What is the basic assumption/underlying premise of VALS? 2. What are...

CMR- Introduction to Marketing 1. What is the basic assumption/underlying premise of VALS? 2. What are the two main classification criteria VALS uses? 3. What are the three principal motivations VALS uses? 4. Do you agree or disagree with your VALS Primary and secondary categorization and why?

It has been reported that there has been a significant increase in miniscule airborne particles in...

It has been reported that there has been a significant increase in miniscule airborne particles in the major capital cities of India. The particles are so small they can travel deep into a human lung, and from there into the bloodstream. There the toxins can cause respiratory illness, heart attacks and cancer. Suppose in the next five years there are sharp increases in the assembly of petrol-based vehicles and consumer demand for high-tech air purifiers and anti-pollution masks. Suppose that...

Basic JAVA Question When we try to run this program, a problem occurs. What is this...

Basic JAVA Question When we try to run this program, a problem occurs. What is this problem called? And why does this problem occur here? public class Main { public static void main(String[] args) { PhoneNumber pn = new PhoneNumber(); System.out.println(pn.isTollFree()); } } class PhoneNumber { String number; public boolean isTollFree() { return number.charAt(1) == '8'; } }

what are the basic assumption if human being according to cognitive counselling approach discuss the cause...

what are the basic assumption if human being according to cognitive counselling approach discuss the cause of employees with problems according to this theory. Explain with examples the counselling steps and process in helping an employee with problem using humanistis counselling theory

What are the basic assumption of human being according to Cognitive Counselling Approach? Discuss the causes...

What are the basic assumption of human being according to Cognitive Counselling Approach? Discuss the causes of employees with problems according to this theory. Explain with examples the counselling steps and process in helping an employee with problem using Humanistic Counselling Theory

What are the basic assumption of human being according to Cognitive Counselling Approach. Discuss the cause...

What are the basic assumption of human being according to Cognitive Counselling Approach. Discuss the cause of employees with problem according to this theory. Explain with examples the counselling steps and process in helping an employee with problem using Humanistic Counselling Theory.

Question