If the Fed had not changed the money supply after the recession in the early 1990s,then the long run effects would have been
A) a return to the original output and price level
B) increased long run GDP equilibrium and price level
C) unchanged long run output,but an increased price level
D) a decreased long run output and price level
E) a return to the original long run output,but a decreased price level

Question

Quizplus · Accepted Answer

In the long run, the economy tends to return to its natural level of output and price level due to self-correcting mechanisms like flexible prices and wages.

If the Fed Had Not Changed the Money Supply After