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:
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.
