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Can a change in velocity offset a change in the money supply (and thus leave no effect on aggregate demand)? Explain your answer.
Macroeconomics
Solutions
Macroeconomics
Can a change in velocity offset a change in the money supply (and thus leave no effect on aggregate demand)? Explain your answer.
Change in velocity and money supply.
Explanation of Solution
Yes, a change in the velocity can offset the change in the money supply leaving the aggregate demand curve unchanged. It is assumed that the money supply in the economy increases and the velocity of money decreases at the same time...
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