Which of the following would cause prices to rise and real GDP to fall in the short run?
A)an increase in the expected price level
B)an increase in the capital stock
C)an increase in the quantity of labour available
D)an increase in money supply

Question

Quizplus · Accepted Answer

An increase in the expected price level will cause prices to rise in the short run and decrease real GDP due to a decrease in purchasing power and investment demand. This is known as the cost-push inflation.

Answer: D
 An increase in money supply will lead to inflationary pressure and eventually lead to an increase in prices in the short run. However, it may cause output to increase in the short run, but it's not guaranteed.

Which of the Following Would Cause Prices to Rise and Real