In the short run,if the Fed responds to a negative real shock by raising the growth rate of the money supply,inflation will be:
A) lower than the rate without responding to the negative shock.
B) higher than the rate without responding to the negative shock.
C) the same as the rate without responding to the negative shock.
D) lower or higher than the rate without responding to the negative shock,depending on the size of money supply growth.

Question

Quizplus · Accepted Answer

By raising the growth rate of the money supply, the Fed is increasing the amount of money available to individuals and businesses, which can increase demand for goods and services. This increase in demand can lead to an increase in prices, causing inflation to be higher than it would be without the Fed's intervention.

In the Short Run,if the Fed Responds to a Negative