The economy is in long-run equilibrium when Senator Soldout argues that the Fed should do more to fight unemployment.He argues that if the Fed increased the money supply faster,more workers would find jobs.The Senator's argument
A)is completely correct.
B)is completely wrong.
C)is true for the short run but not the long run.
D)is true for the long run but not the short run.

Question

Quizplus · Accepted Answer

In the short run, an increase in the money supply can lead to lower interest rates and a boost in investment, which can increase output and employment. However, in the long run, this effect will diminish as prices and wages adjust to the higher level of aggregate demand, resulting in higher inflation and no change in unemployment. Therefore, the Senator's argument may be true in the short run but not in the long run.

The Economy Is in Long-Run Equilibrium When Senator Soldout Argues