If money supply rises, will the price level rise by the same percentage? It all depends...

 

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If money supply rises, will the price level rise by the same percentage? It all depends on what happens to V and Y. The effects will tend to differ in the short run from the long run. Delete the wrong words in the following statements: (a) In the short run, V can change substantially/is unlikely to change much at all when money supply changes. (b) In the short run, a rise in MV (i.e. a rise in aggregate demand) will lead to a rise in the price level/may or may not lead to a rise in the price level depending on the degree of slack in the economy. If money supply rises, will the price level rise by the same percentage? It all depends on what happens to V and Y. The effects will tend to differ in the short run from the long run. Delete the wrong words in the following statements: (a) In the short run, V can change substantially/is unlikely to change much at all when money supply changes. (b) In the short run, a rise in MV (i.e. a rise in aggregate demand) will lead to a rise in the price level/may or may not lead to a rise in the price level depending on the degree of slack in the economy.

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Step 1 Money supply It refers to the increase in the money that is available with the public The mor... View the full answer