Which one of the following statements is the MOST accurate?
A) A permanent increase in the money supply cannot have any short-run effects.
B) A permanent increase in taxes cannot have any short-run effects.
C) A permanent decrease in the money supply cannot have short-run effects.
D) A permanent decrease in taxes cannot have short-run effects.
E) A permanent increase in money demand can be offset with a permanent increase in the money supply of equal magnitude.

Question

Quizplus · Accepted Answer

A permanent increase in money demand can indeed be offset by a permanent increase in the money supply of equal magnitude, maintaining equilibrium in the money market. This is a fundamental principle in monetary economics, where adjusting the money supply can counteract changes in money demand to stabilize the economy.

Which One of the Following Statements Is the MOST Accurate