In the aggregate demand-aggregate supply model,an increase in the money supply will cause in the short run a(n)
A)increase in both the price level and real GDP
B)decrease in both the price level and real GDP
C)increase in real GDP and a decrease in the price level
D)decrease in real GDP and an increase in the price level
E)increase in the price level only

Question

Quizplus · Accepted Answer

An increase in the money supply typically lowers interest rates, which boosts investment and consumption, leading to an increase in aggregate demand. In the short run, this results in higher real GDP and a higher price level.

In the Aggregate Demand-Aggregate Supply Model,an Increase in the Money