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Part $1$

Consider the historical debate between Keynesians and Monetarists regarding the effectiveness of monetary policy in changing real GDP$.$ A change in the money supply would have no$$ short$-$run effect on real GDP when

$($i$)$ Changes in the money supply effective

Quantity of money

Interest rate

Upper M Subscript Upper S Superscript $0$Upper M Subscript Upper S Superscript $1$nothingUpper M $0$Upper M $1$nothingi $0$i $1$Upper M Subscript Upper D

A graph has a horizontal axis labelled Quantity of Money and a vertical axis labelled Interest Rate. From left to right, a curve labelled Upper M Subscript Upper D falls at a decreasing rate. A vertical line labelled Upper M Subscript Upper S Superscript $0$ passes through the curve at $($Upper M $0,$ i $0).$ Another vertical line, which is to the right of Upper M Subscript Upper S Superscript $0,$ is labelled Upper M Subscript Upper S Superscript $1$ and passes through the curve at $($Upper M $1,$ i $1).$

Investment

Interest rate

nothingnothingi $0$i $1$Upper I $0$Upper I $1$Upper Delta Upper IUpper I Superscript Upper D

A graph has a horizontal axis labelled Investment and a vertical axis labelled Interest Rate. From left to right, a curve labelled Upper I Subscript Upper D falls at a decreasing rate, passing through $($Upper I $0,$ i $0)$ and then $($Upper I $1,$ i $1).$ The horizontal distance between Upper I $0$ and Upper I $1$ is labelled Upper Delta Upper I and is equal to about one third of the distance of the horizontal axis.

$($ii$)$ Changes in the money supply ineffective

Quantity of money

Interest rate

Upper M Subscript Upper S Superscript $0$Upper M Subscript Upper S Superscript $1$nothingUpper M $0$Upper M $1$nothingi $0$i $1$Upper M Subscript Upper D

A graph has a horizontal axis labelled Quantity of Money and a vertical axis labelled Interest Rate. From left to right, a curve labelled Upper M Subscript Upper D falls at a decreasing rate. A vertical line labelled Upper M Subscript Upper S Superscript $0$ passes through the curve at $($Upper M $0,$ i $0).$ Another vertical line, which is to the right of Upper M Subscript Upper S Superscript $0,$ is labelled Upper M Subscript Upper S Superscript $1$ and passes through the curve at $($Upper M $1,$ i $1).$

Investment

Interest rate

nothingnothingi $0$i $1$Upper I $0$Upper I $1$Upper Delta Upper IUpper I Superscript Upper D

A graph has a horizontal axis labelled Investment and a vertical axis labelled Interest Rate. From left to right, a curve labelled Upper I Subscript Upper D falls at a decreasing rate, passing through $($Upper I $0,$ i $0)$ and then $($Upper I $1,$ i $1).$ The horizontal distance between Upper I $0$ and Upper I $1$ is labelled Upper Delta Upper I and is equal to about one tenth of the distance of the horizontal axis.

Part $2$

A$.$

the investment demand curve is vertical.

B$.$

the money supply curve is horizontal.

C$.$

the money supply curve is vertical.

D$.$

the investment demand curve is horizontal.