Monetary authorities might attempt to minimize the impact of the strategic input price increases on unemployment by
A) doing nothing because unemployment is unchanged.
B) increasing the money supply to shift aggregate demand to AD₁.
C) increasing the money supply to shift aggregate supply to AS₂.
D) decreasing the money supply to shift aggregate supply to AS₁.
E) decreasing the money supply to shift aggregate demand back to AD₀.

Question

Quizplus · Accepted Answer

Increasing the money supply can shift the aggregate demand curve to the right (to AD₁), potentially offsetting the negative impact of strategic input price increases on employment by stimulating economic activity and demand for labor.

Monetary Authorities Might Attempt to Minimize the Impact of the Strategic