If a central bank increases the money supply in response to an adverse supply shock,then which of the following quantities moves closer to its pre-shock value as a result?
A)both the price level and output
B)the price level but not output
C)output but not the price level
D)neither output nor the price level

Question

Quizplus · Accepted Answer

Increasing the money supply can help boost output by lowering interest rates and encouraging investment and consumption, but it may not necessarily bring the price level back to its pre-shock value due to inflationary pressures.

If a Central Bank Increases the Money Supply in Response