1. European pilfering (taking) silver from the new world (Central and South America) from 1500 to 1650 caused the supply of silver to rise and its value to fall in Europe. Countries on a silver standard experienced inflation (the price of other goods, in terms of silver, rose as the value of silver fell). Use the (long-run) money market diagram to show this event. Label your diagram and specify the functional forms of money supply and money demand in your diagram.
2. Referring to the question above, use the short-run money market and Aggregate Demand to show the transition from an influx of money to inflation. Follow instructions as in the previous question.