When the central bank buys bonds from the private sector and
thereby increases the nominal money supply
1. wealth increases when the price level is
fixed and there is less than full employment if Ricardian
Equivalence holds.
2. wealth is unaffected when there is price
flexibility and full employment and Ricardian Equivalence holds.
3. wealth is unaffected under fixed prices and
less-than-full-employment conditions under the implicit traditional
Keynesian assumption with respect to Ricardian Equivalence.
4. all of the above are true.
Choose the correct option.