According to AD-AS model, the primary long-run effect of increases in the money supply is
A)higher price level.
B)higher GDP.
C)lower price level.
D)lower GDP.

Question

Quizplus · Accepted Answer

According to the AD-AS model, an increase in the money supply will lead to an increase in aggregate demand (AD) due to an increase in consumption and investment spending. This increase in AD will shift the AD curve to the right, resulting in an increase in both price level and output in the short run. However, in the long run, the AS curve will shift to the left due to the increase in prices, resulting in a higher price level but no change in output.

According to AD-AS Model, the Primary Long-Run Effect of Increases