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Macroeconomics

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Money Supply Increase: Full Employment

MACRO-XJW431

When an economy is at full employment and the velocity of money is constant, an increase in the money supply in the short run...

A

will increase the price level and be inflationary.

B

will decrease the price level and be deflationary.

C

will reduce aggregate demand and lower real GDP.

D

will eliminate a recessionary gap and lower unemployment.

E

will raise nominal interest rates.