A 5 percent reduction in the money supply will, according to most economists, reduce prices 5 percent:
A)in both the short run and the long run.
B)in neither the short nor the long run.
C)in the short run but lead to unemployment in the long run.
D)in the long run but lead to unemployment in the short run.

Question

Quizplus · Accepted Answer

According to most economists, a reduction in the money supply will lead to lower prices in the long run as the economy adjusts. However, in the short run, it can cause unemployment due to decreased demand and economic activity.

A 5 Percent Reduction in the Money Supply Will, According