To fight the ongoing inflation the central bank reduces the supply of money by 30%. the long-run effect of this policy on the real gdp and the general price level will be:

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Mccarthy

28 August, 03:35

To fight the ongoing inflation the central bank reduces the supply of money by 30%. the long-run effect of this policy on the real gdp and the general price level will be:

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Bradyn Shaw · Answer 1

To fight the ongoing inflation the central bank reduces the supply of money by 30%. The long-run effect of this policy on the real GDP and the general price level will be parallel. This means nominal input or GDP also decreases including consumer spending, which causes a shift of aggregate demand (AD) curve towards the left - corresponding to lower price level.