Using the long-run ISLM model, explain and demonstrate graphically the neutrality of money, for the case of an increase in the money supply
What will be an ideal response?
See figure below.
The increase in the money supply shifts LM to the right, increasing output to Y', above the natural rate Y*. The interest rate falls from i to i'. Excess demand increases the price level, reducing the real value of the money supply. The LM curve shifts back until the all pressure on prices is eliminated by the return to the natural rate of output. The initial and final levels of output and interest rate are the same. No real variables have changed.
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Gross Domestic Product is the market value of all ________ produced within a country in a given period of time
A) final goods B) intermediate goods C) final services D) intermediate services E) final goods and services
Thomas Malthus' prediction of mass starvation resulting from diminishing marginal returns has not been fulfilled because
A) the law of diminishing marginal returns did not hold in this case. B) Malthus ignored other factors like technological change. C) relative to Malthus' day, larger percentage of today's labor works in the agricultural sector. D) All of the above.