In the short run a change in the money supply can affect________, while in the l
ID: 1154078 • Letter: I
Question
In the short run a change in the money supply can affect________, while in the long run neoclassical model, a change in the money supply will affect ____________.
the price level only; output only.
output only; the price level only.
output and the price level; output only.
output and the price level; the price level only.
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Through changes in the discount rate, the Federal Reserve can
force banks to increase reserves but can't force them to decrease reserves
force banks to decrease reserves but can't force them to increase reserves
force either an increase or a decrease in reserves
give banks an incentive to either increase or decrease reserves
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the price level only; output only.
output only; the price level only.
output and the price level; output only.
output and the price level; the price level only.
**********************************************
Through changes in the discount rate, the Federal Reserve can
force banks to increase reserves but can't force them to decrease reserves
force banks to decrease reserves but can't force them to increase reserves
force either an increase or a decrease in reserves
give banks an incentive to either increase or decrease reserves
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Explanation / Answer
In the short run aggregate supply is horizontal and change in the money supply which shifts the aggregate demand curve can affect output only , while in the long run neoclassical model the aggragate supply curve is vertical, a change in the money supply will affect price level only.
Through changes in the discount rate, the Federal Reserve can give banks an incentive to either increase or decrease reserves.