If the central bank increases the money supply, in the short run, output

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Quizplus · Accepted Answer

When the central bank increases the money supply, it typically lowers interest rates, making borrowing cheaper. This encourages spending and investment, leading to increased demand for goods and services. As businesses respond by producing more, they often hire additional workers, thus reducing unemployment. Therefore, output rises and unemployment falls.

If the Central Bank Increases the Money Supply, in the Short