In the AD and SRAS model, a 6 percent increase in the money supply in an economy with a 2 percent Solow growth curve will cause the growth rate to be ____ in the long run.

Question

Quizplus · Accepted Answer

In the long run, changes in the money supply do not affect the economy's potential output or the Solow growth curve. Thus, the growth rate will remain at the same rate as the Solow growth curve, which is 2 percent in this case. Therefore, the correct answer is A) 2 percent.

In the AD and SRAS Model, a 6 Percent Increase