If the money supply is a sunspot variable in the coordination failure model,
A) money would appear to be non-neutral.
B) money would appear to be neutral.
C) money would appear to be dictated by politics.
D) money would appear to be unpredictable.
E) money would appear to be dictated by the private sector.

Question

Quizplus · Accepted Answer

In the coordination failure model, a sunspot variable is an exogenous shock causes agents to coordinate on a specific outcome. If the money supply is a sunspot variable, it means that it is not neutral and can affect the coordination outcome. Therefore, money would appear to be non-neutral.

If the Money Supply Is a Sunspot Variable in the Coordination