From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have
A)raised inflation and unemployment.
B)raised inflation and reduced unemployment.
C)reduced inflation and raised unemployment.
D)reduced inflation and unemployment.

Question

Quizplus · Accepted Answer

According to the short-run Phillips curve, increasing the money supply would typically lead to higher inflation and lower unemployment. This is because in the short run, higher money supply can stimulate economic activity, leading to more demand for labor (thus reducing unemployment) but also leading to higher prices (inflation).

From 2008-2009 the Federal Reserve Created a Very Large Increase