Increase in Price Level What concept, related to monetary policy, does this grap
ID: 1203907 • Letter: I
Question
Increase in Price Level What concept, related to monetary policy, does this graph help demonstrate? 45-degree lin O The O Ragnar Nurkse's balanced growth theory O Buffer theory. O Monetary neutrality. O Convergence hypothesis. ·1 O The liquidity preference model. #2 ·6 ·8 Increase in Money Supply Using the concept or model identified above, in the long run a 30 percent increase in the money supply would result in. .. O O O O a 15 percent increase in the price level a 15 percent decrease in the price level. a 30 percent increase in the price level. a 30 percent decrease in the price level. no increase in the price level.Explanation / Answer
1. Neutrality of money as neutrality of money shows change in the stock of money that affects only nominal variables in the economy like price, wage and does not affect the real economic variables like employment. In the above diagram, change in money supply changes the prices of commodities. So, it shows neutrality of money.
2. As there is direct relationship between the money supply and price level in the economy so when money supply increases by 30% then, price level also increases by 30%.