An expansionary monetary policy is most likely to produce an inflationary effect with little impact on output when the economy

Question

Quizplus · Accepted Answer

When the economy is near full employment and the aggregate supply curve is vertical, an expansionary monetary policy will increase demand for goods and services, but it will not increase the economy's capacity to produce more goods and services. This results in rising prices (inflation) without a significant increase in output.

An Expansionary Monetary Policy Is Most Likely to Produce an Inflationary