In the short run, an unanticipated shift to a more expansionary monetary policy is most likely to result in
A) an increase in short-term interest rates.
B) a reduction in aggregate demand.
C) a reduction in the inflation rate.
D) an increase in employment.

Question

Quizplus · Accepted Answer

An unanticipated shift to a more expansionary monetary policy would lead to an increase in the money supply and a decrease in interest rates. This would lead to an increase in investment and consumer spending, ultimately boosting aggregate demand and resulting in increased employment.

In the Short Run, an Unanticipated Shift to a More