In the long run a reduction in the money supply growth rate affects
A)the inflation rate and the natural rate of unemployment.
B)the inflation rate but not the natural rate of unemployment.
C)neither the inflation rate nor the natural rate of unemployment.
D)the natural rate of unemployment,but not the inflation rate.

Question

Quizplus · Accepted Answer

In the long run, a reduction in the money supply growth rate affects the inflation rate by reducing it, but it does not affect the natural rate of unemployment, which is determined by factors such as labor market policies and technology, not by monetary policy.

In the Long Run a Reduction in the Money Supply