Question

Thank you in advance!

Question 5 -- 12 In the long run, money demand and money supply determine (1) the value of money but not the real interest rate. (2) the value of money and the real interest rate. (3) neither the value of money nor the real interest rate. (4) the real interest rate but not the value of money. Question 6 (-/2 ) When the money market is drawn with the value of money on the vertical axis, if the money supply rises (1) the price level falls and the value of money rises. the price level and the value of money rise. * the price level and the value of money fall. the price level rises and the value of money falls.

Answer 1

Answer 5) In long run money demand and money supply determine real interest rate and not the value of money. At the intersection of money demand and money supply equilibrium is determined.

So, option 4) is correct.

Answer 6) With value for money on vertical axis and if money supply increases it will lead to rightward shift in LM curve and in turn rightward shift in AD curve. As a result price level will rise and value for moneg will fall.

So, option 4) is correct.

Answer 7) If fed increases money supply it will lead to rightward shift in AD and hence price level will rise and 1/P will falls and value for money falls.

So, option 1) is correct.

Answer 8) According to classical dichotomy, if money supply doubles then nominal wages, price level, nominal gdp will doubles because monetory policy will have an impact on nominal variables rather than real variables.

So, option 4) is correct.

Answer 9) MV = PY

Here, M = 6000, P=3, Y=3000

V = 3 × 3000/6000

V = 1.5

So, option 2) is correct.

Answer 10) MV = PY

If M and V are constant and when Y doubles then P has to fall by half in order to get constant change so that equation remains equal.

So, option 4) is correct.

NOTE- PLEASE HIT LIKE AND COMMENT FOR FURTHER CLARIFICATIONS. IT'S URGENT.