Question

f the short-run aggregate supply curve is horizontal and the long-run aggregate supply curve is vertical, then a change in the money supply will change ______ in the short run and change ______ in the long run.

Answer 1

Answer:

1.  only output.

2.  only prices

Explanation:

Aggregate supply curve is a graphical representation of supply indices of a firm which shows the total quantity of output, that is real GDP that firms will produce and sell at given price level.

Hence, given that the short-run aggregate supply curve is horizontal and the long-run aggregate supply curve is vertical, then a change in the money supply will change ONLY OUTPUT in the short run and change ONLY PRICES in the long run.