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:

Obligation to Pay

A legal or financial commitment to make payments to another party or entity.

Paying Cash

The act of settling a transaction or paying an expense with physical currency or cash equivalents at the time of purchase.

Check Form

A paper instrument that instructs a financial institution to pay a certain amount of money from a person's account to the designated recipient.

Purchase

The act of buying goods or services, resulting in a financial transaction.