2. Monetarism Which of the following is a position held by monetarists? The short-run aggregate supply curve is horizontal. The economy is unstable; wages and prices are inflexible. Aggregate demand depends on the money supply and on velocity. The velocity of money is constant. Initially, the economy is in long-term equilibrium. Suppose there is an increase in velocity-that is, there is an increase in the average number of times a dollar is spent to buy goods and services. Show the long-run effect of this change according to the monetarist view, ceteris paribus, by dragging one or both curves on the graph below. ? PRICE LEVEL REAL GDP SRAS AD AD SRAS

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