According to the simple quantity theory of money in the AD-AS framework,when the money supply decreases,the result is __________ in Real GDP and __________ in the price level.

Question

Quizplus · Accepted Answer

According to the simple quantity theory of money in the AD-AS framework, a decrease in the money supply would lead to no change in Real GDP in the long run, but it would cause a fall in the price level. This is because, in the long run, the economy is assumed to return to its potential output, and changes in the money supply only affect price levels, not real output.

According to the Simple Quantity Theory of Money in the AD-AS