Assuming that there is an excess supply of money in the classical model,then
A)a matching excess demand for commodities will lower the aggregate price level.
B)a corresponding excess demand for commodities will drive the aggregate price level up.
C)an equal excess demand for commodities will not affect the price level.
D)None of the above

Question

Quizplus · Accepted Answer

In the classical model, an excess supply of money leads to an increase in the demand for goods and services, causing a corresponding excess demand for commodities which drives the aggregate price level up. This is known as the quantity theory of money, which suggests that changes in the money supply are proportional to changes in the price level. Therefore, choice B is the correct answer.

Assuming That There Is an Excess Supply of Money in the Classical