According to monetarists in the context of self-regulatory theory, if the economy is initially in long-run equilibrium, an increase in the money supply will _______ both the price level and real GDP in the short run but will ______ only _____ in the long run. Group of answer choices lower; lower; the price level raise; lower; price raise; raise; price raise; raise; real GDP

Q: increase real GDP in the short run, but not the long run.

A: Explanation: Now the Economy starts from the semipermanent equilibrium(full employment equilibrium).…

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A: Answer-Need to find- The monetarists believe that interest rates can move in the opposite direction…

Q: According to Monetarists, the price level is likely to remain stable over time if the money supply…

A: Note: In the BNED Guidance, only the first question can be answered at a time. Resend the question…

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Q: Suppose the Federal Reserve (the US central bank) increases the money stock. Which of the following…

A: Answer: Correct option: (B) The price level will further increase, and real GDP will further…

Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.