When the money supply changes, the aggregate-demand curve shifts and the economy moves along a given short-run aggregate-supply curve, causing unexpected changes in output, prices, unemployment and inflation.These changes cause people to adjust their expectations of inflation, leading to shifts in the short-run aggregate-supply curve.

Question

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This is a correct statement about the relationship between changes in the money supply, shifts in the aggregate-demand curve, and adjustments in expectations that can lead to shifts in the short-run aggregate-supply curve.

When the Money Supply Changes, the Aggregate-Demand Curve Shifts and the Economy