In the extended classical model,an unanticipated increase in the money supply would cause output to ________ and the price level to ________ in the short run.
A)increase;increase
B)increase;not change
C)not change;increase
D)decrease;increase

Question

Quizplus · Accepted Answer

In the extended classical model, an increase in the money supply leads to an increase in aggregate demand, leading to an increase in output in the short run. However, since the supply of goods and services is fixed in the short run, this increase in demand leads to an increase in the price level as well.

In the Extended Classical Model,an Unanticipated Increase in the Money