With an economy at full employment, an increase in the money supply will cause an increase in the price level.

Question

Quizplus · Accepted Answer

At full employment, the economy's resources are fully utilized, meaning output is at its maximum sustainable level. An increase in the money supply in such a scenario typically leads to higher demand for goods and services without a corresponding increase in output, leading to higher prices or inflation.

With an Economy at Full Employment, an Increase in the Money