For an economy at full employment, an increase in the quantity of money will lead to which of the following sequences of shifts in aggregate demand and supply curves?

Question

Quizplus · Accepted Answer

An increase in the quantity of money in an economy at full employment typically leads to increased aggregate demand due to more money being available for spending. This can result in inflationary pressure, causing the short-run aggregate supply to decrease as costs of production rise. However, the long-run aggregate supply remains constant as it is determined by factors such as technology and resources, not the money supply.

For an Economy at Full Employment, an Increase in the Quantity