Which one of the following statements is the MOST accurate?
A) Over time, the inflationary pressure that follows a temporary money supply expansion pushes the price level to its long-run value and returns the economy to full employment.
B) Over time, the inflationary pressure that follows a permanent money supply expansion pushes the price level to its long-run value and returns the economy to full employment.
C) Over time, the inflationary pressure that follows a temporary money supply expansion pushes the price level to its long-run value, but leaves the economy in a state of artificially low employment.
D) Over time, the inflationary pressure that follows a permanent money supply expansion pushes the price level to its long-run value, but leaves the economy in a state of artificially low employment.
E) Over time, the inflationary pressure that follows a permanent money supply expansion pushes the price level beyond its long-run value and lower the level of employment.

Question

Quizplus · Accepted Answer

Over time, a permanent expansion of the money supply is more likely to push the price level to its long-run value and return the economy to full employment, according to the long-run neutrality of money concept. Temporary expansions do not have the same long-term effects on the economy's output and employment levels.

Which One of the Following Statements Is the MOST Accurate