1.Suppose the economy begins in long-run macroeconomic equilibrium. What is the long-run effect on the aggregate price level of a 5% increase in the money supply? Explain.2.Again supposing the economy begins in long-run macroeconomic equilibrium, what is the long-run effect on the interest rate of a 5% increase in the money supply? Explain.Tackle the Test: Multiple-Choice Questions1.In the long run, changes in the quantity of money affect which of the following?I. real aggregate outputII. interest ratesIII. the aggregate price levela.I onlyb.II onlyc.III onlyd.I and II onlye.I, II and III
2.An increase in the money supply will lead to which of the following in the short run?
3.A 10% decrease in the money supply will change the aggregate price level in the long run by