-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 130; remain at $13 billion
B)remain at 110; remain at $13 billion
C)fall to 90; remain at $13 billion
D)rise to 120; increase to $15 billion

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 130; remain at $13 billion 
B)remain at 110; remain at $13 billion 
C)fall to 90; remain at $13 billion 
D)rise to 120; increase to $15 billion

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.

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