If a central bank increases the money supply in response to an adverse supply shock, then which of the following quantities moves closer to its pre-shock value as a result?

Question

Quizplus · Accepted Answer

Increasing the money supply can stimulate economic activity, leading to an increase in output towards its pre-shock levels. However, it may also lead to higher inflation, moving the price level further away from its pre-shock value.

If a Central Bank Increases the Money Supply in Response