In the long run, what effect does an increase in the money supply have on prices and unemployment?
A)It leaves prices and unemployment unchanged.
B)It raises prices and unemployment.
C)It raises prices and leaves unemployment unchanged.
D)It leaves prices unchanged and reduces unemployment.

Question

Quizplus · Accepted Answer

An increase in the money supply would lead to a rise in prices due to the increase in demand for goods and services. However, it may also lead to an increase in economic activity, which would result in a reduction in unemployment. Therefore, it will raise prices and leave unemployment unchanged.

In the Long Run, What Effect Does an Increase in the Money