In the long run, if the Fed increases the rate at which it increases the money supply,
A)inflation will be higher.
B)unemployment will be lower.
C)real GDP will be higher.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

If the Fed increases the rate at which it increases the money supply, inflation will be higher in the long run. This is because an increase in the money supply means there is more money available to spend, which can lead to an increase in demand for goods and services. As the demand increases, prices will also increase, leading to inflation. Additionally, if inflation becomes too high, it can lead to an increase in interest rates, which can harm economic growth and increase unemployment. Therefore, while increasing the money supply may lead to short-term economic growth, it can have negative consequences in the long run.

In the Long Run, If the Fed Increases the Rate