In the short run with a model with sticky prices a positive monetary surprise:

Question

Quizplus · Accepted Answer

A positive monetary surprise increases the nominal money supply which leads to a decrease in the real interest rate. This encourages firms to increase production and employment in the short run, leading to an increase in real output. Sticky prices prevent prices from adjusting and therefore the real wage remains unchanged. Decreasing labor demand would occur in the long run, but in the short run, the positive monetary surprise leads to an increase in output.

In the Short Run with a Model with Sticky Prices