Holding all else constant,in the short run,an increase in the money supply can cause a(n):
A) increase in unemployment.
B) lower rate of inflation.
C) decrease in the price level.
D) decrease in real gross domestic product (GDP).
E) increase in real GDP.

Question

Quizplus · Accepted Answer

In the short run, an increase in the money supply can stimulate spending and investment, leading to an increase in aggregate demand and, therefore, an increase in real GDP. This is known as expansionary monetary policy. However, this can also lead to higher inflation if the economy is already operating at full capacity.

Holding All Else Constant,in the Short Run,an Increase in the Money