How might changes in the money supply be non-neutral in the short run?
A) As the amount of money circulating in the economy changes before prices respond,the purchases of consumers change accordingly,which leads producers to change production levels.
B) When money supply changes in the short run,it will affect nominal,but not real,variables in the short run.
C) As money growth increases at a faster rate,it will cause real GDP to grow at an even faster rate.
D) If producers expect inflation to increase,they will increase supply in order to sell before the arrival of inflation.

Question

Quizplus · Accepted Answer

Changes in the money supply can be non-neutral in the short run if prices do not respond immediately, causing changes in consumer behavior and ultimately leading to changes in production levels. For example, if the money supply increases and consumers have more money to spend, they may purchase more goods and services, causing producers to increase their production levels to meet the higher demand. This can lead to short-run fluctuations in output and employment, which can also affect inflationary pressures. Therefore, in the short run, changes in the money supply can have real effects on the economy that are not necessarily tied to changes in prices.

How Might Changes in the Money Supply Be Non-Neutral in the Short