# A in the short run what happens to real output

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Chapter 20 / Exercise 4
Exploring Economics
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(A) In the short run, what happens to real output? Explain why.:!!*il:l!i'(B) In the short run, what happens to the price level? Explain why.152Advanced Placement Economics Macroeconomics: Student Resource Manual © Council for Economic Education, NewYork, N,Y. ,
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Chapter 20 / Exercise 4
Exploring Economics
Sexton Expert Verified
(C) In the short run, what happens to employment and nominal wages? Explain why./(D) In the short run, what happens to nominal interest rates and real interest rates?i(E) In the long run, what happens to real output? Explain why."i."i(F) In the long run, what happens to the price level? Explain why.(G) In the long run, what happens to employment and nominal wages? Explain why./(H) In the long run, what happens to the nominal interest rate and the real interest rate?..!i.i'E'.iiAdvanced Placement Economics Macroeconomles: Student Resource Manual © Council for Economic Education, New York, N,Y,153
iThe Quantity Theory of MoneyThe relationship among money, price, and real output can be represented by the equation of exchange,which typically takes the following form:MVi= PQwherePithe money supplythe velocity of money (the number of times an average dollar bill is spent)the average price levelreal value of all final goods and services (real gross domestic product [GDP])1. Define (in your own words and in one or two sentences each) the four variables in the equationof exchange,This equation, shows the balance between "money;' represented on the left side of the equation, andgoods and services, represented on the right side of the equation, The equation shows that, for a given levdMV P Q.=
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