If the Fed increases $\vec{ M }$ to fight slower real growth after a negative real shock,which of the following should occur?
A) no change in real growth
B) lower real growth
C) lower inflation
D) higher inflation

Question

Quizplus · Accepted Answer

When the Fed increases the money supply to fight slower real growth, it creates more money in circulation. This leads to an increase in demand for goods and services, which can cause higher inflation. Therefore, the best choice is D - higher inflation.

If the Fed Increases M⃗\vec{ M }M To Fight Slower Real Growth After a Negative Real Shock,which

If the Fed Increases $\vec{ M }$ To Fight Slower Real Growth After a Negative Real Shock,which