Suppose the economy experiences a decrease in autonomous consumption (a). Find the difference in impact of the shock on output between the Monetarist model with perfectly inelastic money demand and the Keynesian model with perfectly elastic money demand.
A. 1 - b + c1i1/c2
B. 1 - b + c1i1/c2
C. 1 - MV(1 - b + c1i1/c2)
D. c1/c2
In response to the recent adverse COVID shock, the Monetarist policy prescription would be to:
A. increase the money supply, because it is highly effective at increasing output
B. decrease the money supply, because it is highly effective at increasing output
C. do nothing, since monetary policy cannot impact output.
D. do nothing, since the monetary authority does not have enough information to actively manage the economy.