If the short-run aggregate supply curve is positively sloped and the Fed increases the money supply,aggregate demand:
A)falls,which increases real GDP and the price level.
B)increases,which decreases real GDP and the price level.
C)falls,which decreases real GDP and increases the price level.
D)increases,which decreases real GDP and increases the price level.
E)increases,which increases real GDP and the price level.

Question

Quizplus · Accepted Answer

An increase in the money supply will shift the aggregate demand curve to the right. Since the short-run aggregate supply curve is positively sloped, this will lead to an increase in both the price level and real GDP. Therefore, the correct answer is (E) - increases, which increases real GDP and the price level.

If the Short-Run Aggregate Supply Curve Is Positively Sloped and the Fed