Question

Monetarists believe that in the short run a change in the money supply can affect _______________________, while in the long run, a change in the money supply will affect _____________.

Answer 1

According to monetary policies, in the short run a change in money supply will affect interest rates: an increase in money supply can decrease interest rates and a decrease in money supply can increase interest rates. In the long run, a change in money supply is more concerned with the effect in price level of the economy.