In one version of the monetarist model, we said that the velocity of money, V, is treated as constant (as an approximation of reality). Also, recall that we said monetarists assume that the short-run Aggregate Supply curve is upward sloping (i.e., real GDP, Q, is not fixed in the short run), but the Long-run Aggregate Supply curve is vertical (as in our self-regulating model). Consider the equation of exchange, MV≡PQ (with V treated as fixed). Under the assumptions in this question, Group of answer choices A) none of the other options. B) if the money supply (M)
In one version of the monetarist model, we said that the velocity of money, V, is treated as constant (as an approximation of reality). Also, recall that we said monetarists assume that the short-run Aggregate Supply curve is upward sloping (i.e., real GDP, Q, is not fixed in the short run), but the Long-run Aggregate Supply curve is vertical (as in our self-regulating model). Consider the equation of exchange, MV≡PQ (with V treated as fixed). Under the assumptions in this question, Group of answer choices A) none of the other options. B) if the money supply (M)
Chapter26: Monetary Policy
Section: Chapter Questions
Problem 5SQP
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In one version of the monetarist model, we said that the velocity of money, V, is treated as constant (as an approximation of reality). Also, recall that we said monetarists assume that the short-run
MV≡PQ
(with V treated as fixed). Under the assumptions in this question,
Group of answer choices
A) none of the other options.
B) if the money supply (M) were to increase by x%, the aggregate price level (P) would increase by x%.
C) if the money supply (M) were to increase by x%, real GDP would increase by x%.
D) if the money supply (M) were to increase by x%, the aggregate price level (P) would increase by more than x%.
E) if the money supply (M) were to increase by x%, nominal GDP would increase by x%.
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