Fill in the blanks to make the following statements correctly reflect the theory developed in this chapter.
Question:
Fill in the blanks to make the following statements correctly reflect the theory developed in this chapter.
a. If money is neutral in the long run, then changes in the money supply have no effect on __________ in the long run.
b. If the demand for money is not very sensitive to changes in the interest rate, then the \(M_{D}\) curve will be relatively __________. A(n) An increase in the money supply will lead to an _______________ reduction in the interest rate.
c. If the demand for money is very sensitive to changes in the interest rate, then the \(M_{D}\) curve will be relatively ___________. An increase in the money supply will lead to an __________ reduction in the interest rate.
d. A relatively flat investment demand curve means that a change in the interest rate will have \(a(n)\) _____________ effect on __________ which leads to a relatively large shift in the ________ curve.
e. A relatively steep investment demand curve means that a change in the interest rate will have \(a(n)\)___________ effect on _________ , which leads to a relatively small shift in the _________ curve.
f. Changes in the money supply will have the largest effect on the position of the \(A D\) curve when the \(M_{D}\) curve is relatively ____________ and the ID curve is relatively ______________.
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