Which of the following would cause prices and real GDP to rise in the short run?
A)an increase in the expected price level
B)an increase in the money supply
C)a decrease in the capital stock
D)None of the above is correct.

Question

Quizplus · Accepted Answer

An increase in the money supply would cause a decrease in interest rates, leading to an increase in borrowing and spending, resulting in higher prices and real GDP in the short run. A decrease in the capital stock would lead to a decrease in production, resulting in lower real GDP and possibly higher prices due to reduced supply. An increase in the expected price level may lead to lower spending and investment, causing a decrease in real GDP in the short run. Therefore, only option B is a correct choice.

Which of the Following Would Cause Prices and Real GDP