Question

how are the effects of an increase in the velocity of money and the effects of an increase in the money supply different?
ceteris paribus, a change in the velocity of money, has a more significant impact on aggregate demand than on a change in the money supply.
both can induce inflation in the short run, but only an increase in the velocity of money will lead to a long - term increase in inflation.
in the short run, changes in the money supply impact only the real growth rate, but changes in the velocity of money impact both the price level and the growth rate.
changes in the money supply can lead to permanent changes in aggregate demand, but changes in the velocity of money tend to have temporary changes in aggregate demand.
changes in the money supply are necessarily temporary, but changes in the velocity of money are necessarily permanent.
in the short run, changes in the velocity of money impact only the real growth rate, but changes in the money supply impact both the price level and the growth rate.

Explanation:

• Option 1: There is no such general rule that velocity change has more significant impact on aggregate demand than money - supply change.
• Option 2: An increase in money supply can also lead to long - term inflation (e.g., if central bank continuously increases money supply).
• Option 3: In the short - run, changes in money supply can impact both price level (through aggregate demand - aggregate supply mechanism) and real growth rate (if there is a multiplier effect on output).
• Option 4: Changes in money supply (e.g., a one - time increase in money supply by central bank) can lead to a permanent shift in aggregate demand (assuming no offsetting factors). Changes in velocity of money (e.g., due to a temporary change in consumer or business behavior) tend to be temporary.
• Option 5: Changes in money supply can be permanent (e.g., continuous money - printing by central bank). Changes in velocity of money can be temporary (e.g., a seasonal change in spending behavior).
• Option 6: In the short - run, changes in velocity of money can impact both price level (as it affects aggregate demand) and real growth rate (if it leads to more transactions in the economy).

Answer:

Changes in the money supply can lead to permanent changes in aggregate demand, but changes in the velocity of money tend to have temporary changes in aggregate demand.