In the money market, how is the adjustment to equilibrium brought ...

[mikaylakyoung]

In the money market, how is the adjustment to equilibrium brought about in the short run and in the long run?
 
  What will be an ideal response?

Question 2

The ________, the ________ is the quantity of real GDP supplied and the ________ is the quantity of real GDP demanded.
 
  A) lower the price level; greater; smaller
  B) lower aggregate demand; greater; smaller
  C) higher the price level; greater; smaller
  D) lower the supply of labor; greater; smaller
  E) greater the demand for labor; smaller; greater

[Amiracle]

Answer to Question 1

In the short run, the nominal interest rate adjusts to restore equilibrium in the money market. In the long run, however, the nominal interest rate equals the real interest plus the inflation rate, so it cannot freely adjust to restore equilibrium in the money market. In the long run when the economy is at full employment, the price level changes to restore equilibrium in the money market.

Answer to Question 2

C

[mikaylakyoung]

Thank you

[Amiracle]

No problemo