The upward-sloping short-run aggregate supply curve implies that
A)money is neutral in the short run but has a real effect in the long run.
B)money is neutral in the long run but has a real effect in the short run.
C)money is neutral in both the short run and the long run.
D)money has real effects in both the short run and the long run.

Question

Quizplus · Accepted Answer

The upward-sloping short-run aggregate supply curve implies that money is neutral in the long run but has a real effect in the short run. In the short run, an increase in the money supply can lead to lower interest rates and increase aggregate demand, leading to higher output and prices. However, in the long run, prices and wages adjust fully to changes in the money supply, resulting in a vertical long-run aggregate supply curve where money is neutral.

The Upward-Sloping Short-Run Aggregate Supply Curve Implies That