In the long run, technological progress
A)and increases in the money supply both make the price level rise.
B)and increases in the money supply both make the price level fall.
C)makes the price level rise, while increases in the money supply make prices fall.
D)makes the price level fall, while increases in the money supply make prices rise.

Question

Quizplus · Accepted Answer

Technological progress leads to higher productivity and increases the supply of goods and services, leading to a decrease in prices. On the other hand, increases in the money supply without a corresponding increase in the supply of goods and services lead to an increase in the demand for goods and services, increasing prices. Therefore, in the long run, technological progress leads to a fall in prices while increases in the money supply lead to a rise in prices.

In the Long Run, Technological Progress