Question

In the anticipation phase, the money supply remains constant while price changes, in the long run steady state equilibrium that ensues, money grows at a rate (C) than that of price.

A. higher

B.lower

C.same

please explain the reason. Thank you!

Answer 1

C) Same

In the anticipation phase,the money supply remain constant while price changes,in the long run steady states equilibrium that ensure money grows at a rate same than that of price.

Steady states is when the state variables are constant over time while there is a flow through the system.the state variables parameters that depend on the current state of a system,not on how the system got to that state .hence in the long run state equilibrium that ensure money grows at a rate same than that of price.