A permanent increase in nominal money growth will, in the medium run, cause which of the following?

Question

Quizplus · Accepted Answer

A permanent increase in nominal money growth will eventually lead to an increase in the inflation rate. This is because an increase in the supply of money leads to a decrease in the value of money, meaning that prices will rise over time. In the short run, there may be an increase in output as firms hire more workers and produce more goods due to the lower real interest rate resulting from the increase in nominal money growth, but in the medium run, this effect fades away and the economy settles at a higher level of prices with no long-term effects on output or employment. Therefore, answer choice D is the most accurate.

A Permanent Increase in Nominal Money Growth Will, in the Medium