(Answer all parts, please show how to do the first graph shift.) 2. Monetarism A

Question

(Answer all parts, please show how to do the first graph shift.)

2. Monetarism Aa Aa Consider the monetarist view of the economy. Which of the following is a position held by monetarists? O The economy is unstable; wages and prices are inflexible. O The short-run aggregate supply curve is horizontal. O Aggregate demand depends on the money supply and on velocity. O Velocity of money is constant. Initially, the economy is in long-term equilibrium. Suppose there is a decrease in the money supply. Show the long-term effect of this change according to the monetarist view, ceteris paribus, by dragging one or both curves on the graph below. PRICE LEVEL SRAS AD REAL GDP

Explanation / Answer

Monetarist hold the view aggregte demand depends on the money supply and the velocitywages and prices are inflexible

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