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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

According to the simple quantity theory of money, what will happen to Real GDP and the price level as the money supply rises? Explain your answer.

To determine

The real GDP and price level in the simple quantity theory of money.

Explanation

It is known that the short-run aggregate supply curve is a vertical line, as the supply is fixed in the short run. When the money supply increases in the short run, it will lead to a rightward shift of the aggregate demand curve...

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