Assuming a long-run aggregate supply curve, an increase in the money supply results in _______ in output and _______ in prices.
A)a decrease; a decrease
B)an increase; no change
C)a decrease; no change
D)no change; an increase

Question

Quizplus · Accepted Answer

In the long run, the aggregate supply is vertical, meaning output is at its natural level and does not change with the money supply. However, an increase in the money supply leads to higher prices, causing inflation.

Assuming a Long-Run Aggregate Supply Curve, an Increase in the Money