8. Within the classical form of the quantity theory, the demand for money is given by Md = kPY %3D Suppose income (Y) is given at 400 units, and the money supply (M) is fixed at 200 units. Suppose k drops from its initial value of 0.5 to 0.25. What is the new price level after the change in k? Explain the process that leads to the change in the aggregate price level.
8. Within the classical form of the quantity theory, the demand for money is given by Md = kPY %3D Suppose income (Y) is given at 400 units, and the money supply (M) is fixed at 200 units. Suppose k drops from its initial value of 0.5 to 0.25. What is the new price level after the change in k? Explain the process that leads to the change in the aggregate price level.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand
Section: Chapter Questions
Problem 3CQQ
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