Figure 10.1
-In Figure 11.1 if the money supply increases faster than money demand then:
A)the price level will rise over time.
B)the price level will fall over time.
C)GDP will rise over time.
D)GDP will fall over time.

Question

Figure 10.1 
-In Figure 11.1 if the money supply increases faster than money demand then:
A)the price level will rise over time. 
B)the price level will fall over time. 
C)GDP will rise over time. 
D)GDP will fall over time.

Quizplus · Accepted Answer

When the money supply increases faster than the demand for money, people will have more money to spend, and this will lead to an increase in aggregate demand. As a result, prices will rise over time. This is known as inflation. Therefore, the best choice is A.

Figure 10.1 -In Figure 11.1 If the Money Supply Increases Faster Than