In the monetarist version of the AD-AS framework,a decrease in velocity produces a __________ shift of the __________ curve.

Question

Quizplus · Accepted Answer

In the monetarist version of the AD-AS framework, a decrease in velocity will decrease nominal GDP at any price level, causing a leftward shift of the AD curve. This is because the quantity of money demanded for transactions will fall, leading to a decrease in spending and output. The SRAS curve is not affected by changes in velocity, as it represents the relationship between output and prices in the short run.

In the Monetarist Version of the AD-AS Framework,a Decrease in Velocity