What is most likely to happen in the short run?
A) The price level alone adjusts to balance the supply and demand for money.
B) Output responds to changes in the aggregate demand for goods and services.
C) Changes in the money supply cause a proportional change in the price level.
D) Changes in available production technology for turning capital and labour into output.

Question

Quizplus · Accepted Answer

In the short run, output (real GDP) is more likely to respond to changes in the aggregate demand for goods and services, as firms can adjust their production levels to meet changes in demand. While changes in the money supply can impact the economy in the short run, they may not necessarily cause proportional changes in the price level (C). Changes in production technology (D) are more likely to affect the economy in the long run. While adjusting the price level (A) may be one way to balance the supply and demand for money, it is not the most likely outcome in the short run.

What Is Most Likely to Happen in the Short Run