An increase in the supply of money will lead to _______ in equilibrium real GDP and _______ in equilibrium price level.

Question

Quizplus · Accepted Answer

An increase in the supply of money will lead to an increase in aggregate demand. This will cause an increase in equilibrium real GDP, as output increases to meet the higher demand. At the same time, the increase in aggregate demand will push up prices, resulting in an increase in the equilibrium price level.

An Increase in the Supply of Money Will Lead to _______