In the long run, what effect does an increase in the money supply have on prices and unemployment?
A) It leaves prices and unemployment unchanged.
B) It lowers prices and unemployment.
C) It raises prices and leaves unemployment unchanged.
D) It leaves prices unchanged and reduces unemployment.

Question

Quizplus · Accepted Answer

An increase in the money supply leads to an increase in demand for goods and services, which can result in higher prices. However, if the increase in demand leads to an increase in production, then it could decrease unemployment. In the long run, prices increase and unemployment remains unchanged.

In the Long Run, What Effect Does an Increase in the Money