The economy is in long-run equilibrium when Senator Mefirst argues that the Fed should do more to fight unemployment.He argues that if the Fed increased the money supply faster,more workers would find jobs.The Senator's argument

Question

Quizplus · Accepted Answer

The Senator's argument is true for the short run since an increase in the money supply can stimulate aggregate demand and increase employment. However, in the long run, the economy will adjust to the increased money supply by increasing prices and wages, leading to inflation and no change in the employment rate. Therefore, while the Senator's argument may be helpful in the short run to address unemployment, it is not a sustainable long-term solution.

The Economy Is in Long-Run Equilibrium When Senator Mefirst Argues