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

question 75

Multiple Choice

Suppose we are at a long-run equilibrium point in an AD-AS model.Then the money supply increases.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 rises; in the monetarist version,it does not.
• C) In the monetarist version,the price level falls; in the SQTM version,it does not.
• D) In the monetarist version,the Real GDP rises; 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:

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given period.

Compound Return

It refers to the phenomenon where the interest earned on an investment is reinvested to earn additional interest, leading to exponential growth over time.

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Stock Holdings

The shares of stock that an individual or institution owns in various companies.