When the Fed increases the quantity of money,
A) the price level immediately increases.
B) the price level is slow to change.
C) the nominal interest rate immediately increases but the real interest rate does not change.
D) real GDP immediately decreases.
E) both the nominal interest rate and real interest rate immediately increase.

Question

Quizplus · Accepted Answer

The price level is typically slow to change in response to an increase in the quantity of money. This is because the increase in money supply needs time to circulate through the economy and affect prices.

When the Fed Increases the Quantity of Money