If the short-run aggregate supply curve is horizontal and the Federal Reserve increases the money supply, then:
A)output and employment will increase in the short run.
B)output and employment will decrease in the short run.
C)prices will increase in the short run.
D)prices will decrease in the short run.

Question

Quizplus · Accepted Answer

If the short-run aggregate supply curve is horizontal, it means that producers can increase output without an increase in prices. If the Federal Reserve increases the money supply, it will increase aggregate demand, leading to increased output and employment in the short run.

If the Short-Run Aggregate Supply Curve Is Horizontal and the Federal