Suppose that money supply growth increases.In the long run,this increases employment according to
A)both the long-run Phillips curve and the aggregate demand and aggregate supply model.
B)neither the long-run Phillips curve nor the aggregate demand and aggregate supply model.
C)the long-run Phillips curve,but not the aggregate demand and aggregate supply model.
D)the aggregate demand and aggregate supply model,but not the long-run Phillips curve

Question

Quizplus · Accepted Answer

According to the long-run Phillips curve, changes in money supply growth do not affect employment in the long run as unemployment eventually returns to its natural rate. Similarly, in the long-run aggregate supply and demand model, changes in money supply growth only lead to changes in the overall price level and do not affect employment. Therefore, neither model predicts that an increase in money supply growth will increase employment in the long run.

Suppose That Money Supply Growth Increases