Given the expected price level,policies for reaching potential GDP will work best if the money supply is:
A)large,so that prices at potential GDP are below expectations and people can afford to buy enough goods to support the natural level of employment.
B)large enough,so that prices at potential GDP are above expectations and firms can afford to hire workers.
C)small,so that prices at potential GDP are below expectations and people can afford to buy enough goods to support the natural level of employment.
D)small,so that prices at potential GDP are above expectations and firms can afford to hire the workers.
E)exactly the size that makes prices equal to the prices people expected to prevail.

Question

Quizplus · Accepted Answer

An appropriately sized money supply that aligns actual prices with expected prices facilitates economic stability, ensuring that both consumers and producers can make decisions based on accurate price expectations, thereby supporting the economy at its potential GDP.

Given the Expected Price Level,policies for Reaching Potential GDP Will