In the short run, after an increase in the money supply, employment _____, and the price level:
A) rises; rises.
B) rises; falls.
C) falls; rises.
D) falls; falls.

Question

Quizplus · Accepted Answer

In the short run, an increase in the money supply typically leads to lower interest rates, which boosts investment and spending, thereby increasing demand for goods and services. This increase in demand leads to higher employment and a rise in the price level due to inflationary pressures.

In the Short Run, After an Increase in the Money