If the central bank increases the money supply,in the short run,the price level

Question

Quizplus · Accepted Answer

When the central bank increases the money supply, there is an increase in aggregate demand, leading to an increase in the price level. This is known as demand-pull inflation. This increase in aggregate demand also leads to an increase in output and employment in the short run, thereby reducing unemployment. Therefore, the correct answer is (B) - the price level rises and unemployment falls.

If the Central Bank Increases the Money Supply,in the Short