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Question- In one version of the monetarist model , we said that the velocity of money , V , is treated as constant as an

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In one version of the monetarist model , we said that the velocity of money , V , is treated as constant as an approximation of reality ) . Also , recall that we said monetarists assume that the short - run Aggregate Supply curve is upward sloping ( i.e. , real GDP , Q , is not fixed in the short run ) , but the Long - run Aggregate Supply curve is vertical ( as in our self - regulating model ) . Consider the equation of exchange , MV = PQ ( with V treated as fixed ) . Under the assumptions in this question ,

a . if the money supply ( M ) were to increase by x % , the aggregate price level ( P ) would increase by x % .

b . if the money supply ( M ) were to increase by x % , real GDP would increase by x % c . if the money supply ( M ) were to increase by x % , nominal GDP would increase by x % .

d . if the money supply ( M ) were to increase by x % , the aggregate price level ( P ) would increase by more than x % .

e . none of the above .

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