Which of the following will happen when the economy makes the transition from its short-run equilibrium to its long-run equilibrium? (Note: Donot adjust the graphs to reflect the transition to the long run.) Check all that apply.The price level will remain unchanged.The demand for money will rise.The equilibrium interest rate will fall.Is this analysis consistent with the proposition that the money supply has real effects in the short run but is neutral in the long run?YesNo 2. Problems and Applications Q2The Federal Reserve decreases the money supply by 5 percent.On the following graph, use the theory of liquidity preference to illustrate the impact of this policy on the interest rate.Interest RateMoney SupplyHPrice LevelQuantity of MoneyLRASMoney DemandOn the following graph, use the model of aggregate demand and aggregate supply to illustrate the impact of this change in the interest rate on outputand the price level in the short run.Aggregate SupplyAggregate DemandQuantity of OutputAggregate Demand0Aggregate SupplyMoney DemandLRASMoney Supply?

The increase in money supply means that the consumers have liquid finances in their hands. With more…

Which of the following will happen when the economy makes the transition from its short-run equilibrium to its long-run equilibrium? (Note: Do not adjust the graphs to reflect the transition to the long run.) Check all that apply. The price level will remain unchanged. The demand for money will rise. The equilibrium interest rate will fall. Is this analysis consistent with the proposition that the money supply has real effects in the short run but is neutral in the long run? Yes No

Which of the following will happen when the economy makes the transition from its short-run equilibrium to its long-run equilibrium? (Note: Do not adjust the graphs to reflect the transition to the long run.) Check all that apply. The price level will remain unchanged. The demand for money will rise. The equilibrium interest rate will fall. Is this analysis consistent with the proposition that the money supply has real effects in the short run but is neutral in the long run? Yes No

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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