If the money supply decreases by 10%, the aggregate price level will remain constant in the long run.

Name: If the money supply decreases by 10%, the aggregate price level will remain constant in the long run.
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Question

Quizplus · Accepted Answer

According to the quantity theory of money, a decrease in the money supply leads to a decrease in aggregate demand, causing a decrease in prices in the long run. Therefore, the aggregate price level would not remain constant if the money supply decreases by 10%.

If the Money Supply Decreases by 10%, the Aggregate Price