Consider the AD/AS model with a constant inflation rate. It is possible that the money supply is rising while interest rates are unchanged because... a. Declining interest rates cause the investment demand curve to shift to the left, which causes interest rates to rise back to their original level. b. The rising price level increases money demand, offsetting the impact of the rising money supply. c. The rising price level decreases money demand which pushes up interest rates. d. Declining interest rates cause the investment demand curve to shift to the right, which causes interest rates to rise back to their original leve. e. The money transmission mechanism does not apply in a situation of sustained inflation.
Consider the AD/AS model with a constant inflation rate. It is possible that the money supply is rising while interest rates are unchanged because...
a.
Declining interest rates cause the investment
b.
The rising price level increases money demand, offsetting the impact of the rising money supply.
c.
The rising price level decreases money demand which pushes up interest rates.
d.
Declining interest rates cause the investment demand curve to shift to the right, which causes interest rates to rise back to their original leve.
e.
The money transmission mechanism does not apply in a situation of sustained inflation.
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