In the short run, an unanticipated increase in the money supply will exert its primary impact on
A) output and employment rather than on prices.
B) prices; output and employment will be largely unaffected.
C) interest rates; rising interest rates will stimulate additional saving.
D) prices, if the economy operates at an output level below its long-run supply constraint.

Question

Quizplus · Accepted Answer

In the short run, an unanticipated increase in the money supply typically leads to higher output and employment because prices and wages are sticky and do not adjust immediately. This results in increased demand for goods and services, boosting production and employment.

In the Short Run, an Unanticipated Increase in the Money