Given the Keynesian AS-curve, expansionary monetary policy will
A)increase the level of output but leave the price level unchanged
B)increase the price level but leave the level of output unchanged
C)increase both the level of output and the price level
D)leave the level of output and the price level unchanged
E)increase the level of output but decrease the price level

Question

Quizplus · Accepted Answer

Expansionary monetary policy, according to Keynesian economics, lowers interest rates, which increases investment and consumption, thereby increasing the level of output. However, in the short run, the price level remains unchanged because prices are sticky downwards according to Keynesian theory.

Given the Keynesian AS-Curve, Expansionary Monetary Policy Will