1. "The Bangladesh Bank has created additional money worth Tk70,794 crore through various refinance schemes and easing regulatory requirements after the Covid-19 outbreak in March for stimulating demand to revive the declining economy."

a. If the government increases the money supply do you think it will affect the product market? How it will affect i. the price level, value of money, and ii. Loanable fund market (Real GDP and Supply of loan)? [Use the relevant diagrams].

b. According to Monetarism, when does an increase in money supply change both Real GDP and price level? Compare the main ideas of Monetarism and the Simple quantity theory of money. [Explain your answer using diagram]

c. Do you think creating this additional money will lead to inflation? What type of inflation, demand-induced or supply-induced continued inflation? How does the expected inflation work? [ Draw a relevant diagram to explain your answer]