Most policy makers agree that in the long run, changes in the money supply influence _____
A) the price level, inflation, and employment.
B) the real interest rate and aggregate demand.
C) the planned investment expenditure.
D) the exchange rate.
E) the potential GDP and unemployment.

Question

Quizplus · Accepted Answer

Changes in the money supply can be a powerful tool for controlling inflation and promoting employment. An increase in the money supply can lead to higher spending, which in turn can lead to higher prices and ultimately inflation. However, if the increase in spending is used to increase aggregate demand through investment and consumption, it can lead to an increase in output and employment. Similarly, a decrease in the money supply can lead to a decrease in spending and a decrease in prices, but can also lead to a decrease in output and employment. Therefore, most policy makers agree that changes in the money supply influence the price level, inflation, and employment in the long run.

Most Policy Makers Agree That in the Long Run, Changes