There is a temporary adverse supply shock.Given the effects of this shock,if the central bank chooses to return unemployment closer to its previous rate it would
A)raise the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve right.
B)raise the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve left.
C)reduce the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve right.
D)reduce the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve left.

Question

Quizplus · Accepted Answer

Increasing the money supply can reduce unemployment in the short run but may lead to higher inflation, shifting the short-run Phillips curve to the right in the long run.

There Is a Temporary Adverse Supply Shock