Holding all else constant,in the short run,an increase in the money supply can cause a(n)
A) increase in unemployment.
B) lower rate of inflation.
C) decrease in the price level.
D) decrease in real gross domestic product (GDP).
E) increase in real gross domestic product (GDP).

Question

Quizplus · Accepted Answer

In the short run, an increase in the money supply can lead to an increase in aggregate demand, which can cause an increase in real GDP. This is because the increase in the money supply makes credit cheaper and more readily available, which can lead firms to increase investment and consumers to increase spending.

Holding All Else Constant,in the Short Run,an Increase in the Money