Suppose the factors of production are ?xed and furthermore suppose the Fed announced today that they are going to reverse the quantitative easing e?orts and decrease the money supply in the near future.
A. What happens to expected in?ation?
B. What happens to the money supply today?
C. Assume we are utilizing our real money balances model where money demand depends not only on income but also on the cost of money. What happens to prices today?