If the Fed were to increase the money supply, inflation would increase and unemployment would decrease in the short run.

Question

Quizplus · Accepted Answer

Increasing the money supply typically lowers interest rates, encouraging borrowing and spending, which can boost economic activity and reduce unemployment. However, if the economy is near or at full capacity, this can lead to higher inflation as demand outstrips supply.

If the Fed Were to Increase the Money Supply, Inflation