In the Keynesian model in the long run,an increase in the money supply will cause
A)an increase in output and a decrease in the real interest rate.
B)a decrease in the real interest rate but no change in output.
C)an increase in the real interest rate and an increase in output.
D)no change in either the real interest rate or output.

Question

Quizplus · Accepted Answer

In the Keynesian model, in the long run, the increase in the money supply will not affect the real interest rate or output as prices and wages adjust to the new level of money supply. This is because prices and wages are flexible in the long run, allowing the economy to return to its potential output level. Therefore, there will be no change in either the real interest rate or output.

In the Keynesian Model in the Long Run,an Increase in the Money