Beginning in equilibrium in an AD and SRAS model, an unexpected increase in the money supply growth will cause

Question

Quizplus · Accepted Answer

An unexpected increase in the money supply growth will shift the AD curve to the right as households and firms have more money to spend. This will cause an increase in both inflation and real growth in the short run. However, in the long run, the AS curve will shift to the left to adjust to the higher price level, leading to an increase in inflation and a decrease in real growth.

Beginning in Equilibrium in an AD and SRAS Model, an Unexpected