An increase in money growth will cause output growth 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 short run, an increase in money growth can stimulate spending and boost economic activity through the multiplier effect, resulting in an increase in output growth. However, in the long run, the increase in money supply will mainly lead to higher prices without affecting the real output growth, according to the quantity theory of money. So, the answer is option A, "the short run only."

An Increase in Money Growth Will Cause Output Growth to Increase