A shift to a more  expansionary  monetary policy will generally  _________ in the short run, but if the rapid monetary expansion persists, the  long-run result will be  ______.(fill in the blanks.)
A) expand output and employment; inflation
B) increase the general level of prices; expand  output and employment
C) increase the rate of unemployment; reduce the rate of inflation
D) reduce the rate of inflation;  increase the rate of unemployment

Question

A shift to a more  expansionary  monetary policy will generally  _________ in the short run, but if the rapid monetary expansion persists, the  long-run result will be  ______.(fill in the blanks.)
A) expand output and employment; inflation
B) increase the general level of prices; expand  output and employment
C) increase the rate of unemployment; reduce the rate of inflation
D) reduce the rate of inflation;  increase the rate of unemployment

Quizplus · Accepted Answer

A shift to a more expansionary monetary policy will initially expand output and employment in the short run due to an increase in money supply and lowering of interest rates, which stimulates spending and investment. However, if the rapid monetary expansion persists, it can lead to higher inflation in the long run as more money chases the same amount of goods and services, creating an overheated economy.

A Shift to a More Expansionary Monetary Policy Will Generally _________ in the Short