Author Question: Suppose there is an increase in the money supply, but that people's demand for money balances ... (Read 109 times)

jerry coleman · **on:** Jun 30, 2018

Suppose there is an increase in the money supply, but that people's demand for money balances increases by a greater amount at the same time. The net effect would be

A) lower interest rates, greater real GDP, and a higher price level as aggregate demand increases because of the indirect effect of the increase in the money supply.
B) no change in aggregate demand or aggregate supply.
C) a lower price level in the long run.
D) an increase in aggregate demand due to the increase in the money supply, but a decrease in aggregate supply due to the increase in the demand for money.

Question 2

According to New Keynesians, which of the following is one of the two key factors that determines the inflation rate?

A) stock prices B) oil prices
C) fiscal policy D) anticipated future inflation