-In the above figure, suppose the economy starts at point A. The short- run response to an increase in the growth rate of the quantity of money in the monetarist business cycle theory is for the price level to _ and real GDP to .
A) rise to 120; increase to $12 trillion
B) remain at 110; remain at $10 trillion
C) fall to 90; remain at $10 trillion
D) rise to 130; remain at $10 trillion

Question

-In the above figure, suppose the economy starts at point A. The short- run response to an increase in the growth rate of the quantity of money in the monetarist business cycle theory is for the price level to _ and real GDP to .
A) rise to 120; increase to $12 trillion 
B) remain at 110; remain at $10 trillion 
C) fall to 90; remain at $10 trillion 
D) rise to 130; remain at $10 trillion

Quizplus · Accepted Answer

In the monetarist business cycle theory, an increase in the growth rate of the quantity of money leads to a short-run increase in both the price level and real GDP. Thus, the price level rises to 120 and real GDP increases to $12 trillion.

-In the Above Figure, Suppose the Economy Starts at Point