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Classical theory of inflation

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a) In the "Classical Theory of Inflation", what determines the price level and the value of money? Explain using a supply and demand plot.

b) Now using your supply and demand plot from part a) of this question, illustrate the impact of an expansionary monetary policy on the inflation rate and the price level. Please explain how the transition process works from the initial equilibrium to the final equilibrium.

Reference no: EM133215279

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