When the money supply rises by 10%,in the short run,output ________ and the price level ________.
A)rises; is unchanged
B)declines; falls
C)is unchanged; falls
D)declines; is unchanged

Question

Quizplus · Accepted Answer

In the short run, an increase in the money supply will lead to an increase in aggregate demand, which in turn will lead to an increase in output and prices. However, since prices are "sticky" in the short run, they may not adjust immediately, leading to a temporary period where output rises but prices remain unchanged. This is known as the "price puzzle" and is consistent with the answer choice A.

When the Money Supply Rises by 10%,in the Short Run,output