The Bank of Canada announces that it will increase the money supply by 5 percent for the next five years.This will cause

Question

Quizplus · Accepted Answer

Increasing the money supply will lead to an increase in aggregate demand in the short run, which may cause a temporary decrease in unemployment but will ultimately lead to increased inflation. This shift of the Phillips curve to the right indicates an inverse relationship between inflation and unemployment as inflation increases with the increase in the money supply.

The Bank of Canada Announces That It Will Increase the Money