In the short- run, an increase in the money supply will cause output:
A) not to change.
B) to increase.
C) to fluctuate up and then down.
D) to decrease.

Question

Quizplus · Accepted Answer

In the short-run, an increase in the money supply will likely lower interest rates, encouraging increased borrowing and spending, which will lead to an increase in output. This is known as the liquidity effect.

In the Short- Run, an Increase in the Money Supply