In the long run, money demand and money supply determine

the price level and the real interest rate.

the price level but not the real interest rate.

the real interest rate but not the price level.

neither the price level nor the real interest rate.

answer

watching

105

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Shree Harini VLv5

4 Sep 2020

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

The principle of monetary neutrality implies that an increase in the money supply will

A. increase real GDP and the price level.

B. increase the price level, but not real GDP.

C. increases real GDP, but not the price level.

D. increases neither the price level nor real GDP.

fuchsiahound634

1. According to classical macroeconomic theory, changes in the money supply affect:

a. real GDP and the price level.

b. real GDP but not the price level.

c. the price level, but not real GDP.

d. neither the price level nor real GDP

2. Aggregate demand shifts right if:

a. government purchases increase and shifts left if stock prices rise.

b. government purchases increase and shifts left if stock prices fall.

c. government purchases decrease and shifts left if stock prices rise.

d. government purchases decrease and shifts left if stock prices fall.

ceruleanseal203

The Federal Reserve expands the money supply by 5 percent:

a. Use the theory of liquidity preference to illustrate in a graph the impact of this policy on the interest rate.
b. Use the model of aggregate demand and aggregate supply to illustrate the impact of this change
in the interest rate on output and the price level in the short run.
c. When the economy makes the transition from its short-run equilibrium to its new long-run equilibrium, what will happen to the price level?
d. How will this change in the price level affect the demand for money and the equilibrium interest rate?
e. Is this analysis consistent with the proposition that money has real effects in the short run but is neutral in the long run?