In the dynamic AD-AS model, an increase in money growth will cause the growth rate of real GDP to increase in
A) the short run only.
B) the long run only.
C) both the short run and the long run.
D) neither the short run nor the long run.

Question

Quizplus · Accepted Answer

In the dynamic AD-AS model, an increase in money growth typically leads to higher aggregate demand, which can boost the growth rate of real GDP in the short run. However, in the long run, the effects of increased money growth are neutralized by inflation, and real GDP growth returns to its natural rate.

In the Dynamic AD-AS Model, an Increase in Money Growth