Assume the economy is initially operating at the natural level of output.Which of the following events will NOT change the composition of output (i.e.,the percentage of GDP composed of consumption,investment,...etc.)in the medium run?
A)a reduction in government spending
B)a cut in taxes
C)a reduction in the desire to save
D)an increase in consumer confidence
E)an increase in the money supply

Question

Quizplus · Accepted Answer

In the medium run, an increase in the money supply will primarily affect the price level rather than the composition of output, as the economy adjusts back to the natural level of output.

Assume the Economy Is Initially Operating at the Natural Level