In the short run, which of the following is not correct?
A)Increasing the money supply increases the demand for goods and services.
B)Increasing the money supply encourages firms to hire more workers.
C)Lowering the money supply leads to a higher level of unemployment.
D)Policies that encourage higher employment will also induce a lower rate of inflation.

Question

Quizplus · Accepted Answer

In the short run, policies that encourage higher employment can actually lead to higher inflation due to increased demand for goods and services. This is because, as employment rises, so does consumers' purchasing power, potentially leading to demand-pull inflation. This contradicts the statement in option D, making it incorrect in the context of short-run economic behavior.

In the Short Run, Which of the Following Is Not