-Refer to Exhibit 16-3.The economy is at point A.According to the Friedman natural rate theory,in the long run after a rise in the money supply,the economy will be at point

Question

Quizplus · Accepted Answer

According to the Friedman natural rate theory, in the long run, an increase in the money supply will only affect nominal variables like the price level, but not real variables like output or unemployment. The economy moves from point A to point D, where the price level is higher but the output and unemployment rate return to their natural rates.