In the short run,
A) the price level alone adjusts to balance the supply and demand for money.
B) output responds to changes in the aggregate demand for goods and services.
C) changes in the money supply cause a proportional change in the price level.
D) increases in the money supply shift the aggregate supply curve causing output to rise.

Question

Quizplus · Accepted Answer

In the short run, changes in the aggregate demand for goods and services affect output. This happens because firms can increase their production by hiring more workers and using existing resources more efficiently, without needing to invest in new capital goods or technologies. This response to changes in demand creates short-run fluctuations in output, employment, and prices. The price level also adjusts in the short run, but it is not the only variable that affects output. Changes in the money supply can also influence aggregate demand, but they do not necessarily cause proportional changes in the price level. Similarly, increases in the money supply may stimulate output, but they do not directly shift the aggregate supply curve.

In the Short Run