Monetarists would argue that in the short run, increases in the money supply act to raise both investment and consumption, while also increasing the price level.

Question

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Monetarists believe in the Phillips Curve relationship between money supply, employment, and inflation. In the short run, an increase in the money supply leads to lower interest rates, which encourages investment and consumption. However, this can also lead to inflation, which reduces the real value of money and potentially offsets the benefits of increased investment and consumption.

Monetarists Would Argue That in the Short Run, Increases in the Money