An unanticipated increase in the money supply will initially exert its primary impact on
A)output and employment rather than on prices.
B)prices;output and employment will be largely unaffected.
C)interest rates;rising interest rates will stimulate additional saving.
D)prices if the economy operates at an output level below its long-run supply constraint.

Question

Quizplus · Accepted Answer

An unanticipated increase in the money supply typically leads to higher output and employment in the short run because it lowers interest rates, encouraging investment and spending. Prices tend to adjust more slowly.

An Unanticipated Increase in the Money Supply Will Initially Exert