If the central bank increases the money supply,then in the short run prices
A)rise and unemployment falls.
B)fall and unemployment rises.
C)and unemployment rise.
D)and unemployment fall.

Question

Quizplus · Accepted Answer

According to the Quantity Theory of Money, an increase in the money supply leads to an increase in aggregate demand, which may result in an increase in prices in the short run. This is because there is more money available in the economy to purchase goods and services, which can lead to inflationary pressure. However, in the short run, this can also result in a reduction in unemployment as firms may need to hire more workers to meet the increased demand for their products or services. Therefore, A is the correct choice.

If the Central Bank Increases the Money Supply,then in the Short