Suppose We Are at a Long-Run Equilibrium Point in an AD-AS

question 18

Multiple Choice

Suppose we are at a long-run equilibrium point in an AD-AS model.Then the money supply falls.In the short run,is there any difference between what happens in the simple quantity theory of money (SQTM) version and the monetarist version of the model?

• A) There is no difference.
• B) In the SQTM version,the price level falls; in the monetarist version,it does not.
• C) In the monetarist version,Real GDP falls; in the SQTM version,it does not.
• D) In the monetarist version,the price level falls; in the SQTM version,it does not.
• E) In the SQTM version,Real GDP falls; in the monetarist version,it does not.

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Definitions:

Discounted

The process of determining the present value of a payment or a series of payments made in the future, using a specific discount rate.

9%

Typically refers to a specific interest rate or percentage in financial contexts, such as a loan interest rate or investment return rate.

Annual Rate

The interest rate for a period of one year, often used to compare the yield of financial products or loans.

Retirement

The act of leaving one's job and ceasing to work, typically upon reaching a certain age, with various financial implications for pensions and savings.