In the long run, money demand and money supply determine
A)the value of money and the real interest rate.
B)the value of money but not the real interest rate.
C)the real interest rate but not the value of money.
D)neither the value of money nor the real interest rate.

Question

Quizplus · Accepted Answer

In the long run, money demand and money supply primarily determine the value of money (i.e., the purchasing power of money or the price level) but not the real interest rate. The real interest rate is influenced by factors such as productivity and preferences for saving and investment, rather than by money supply and demand directly.

In the Long Run, Money Demand and Money Supply Determine