What would cause prices and real GDP to rise in the short run?
A) an increase in the expected price level
B) an increase in the money supply
C) a decrease in the capital stock
D) an import tariff

Question

Quizplus · Accepted Answer

An increase in the money supply would cause an increase in aggregate demand, leading to an increase in both prices and real GDP in the short run.

The other options would not necessarily lead to an increase in both prices and real GDP. A) An increase in the expected price level would lead to an increase in prices, but it could also lead to a decrease in real GDP if firms and consumers adjust their behavior to the higher prices. C) A decrease in the capital stock would likely lead to a decrease in real GDP, and prices could go up or down depending on the nature of the shock. D) An import tariff could lead to higher prices for the affected goods, but it could also reduce overall trade and decrease real GDP.

What Would Cause Prices and Real GDP to Rise in the Short