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If the short-run aggregate supply curve is positively sloped and the Fed increases the money supply, aggregate demand _____ a
If the short-run aggregate supply curve is positively sloped and the Fed increases the money supply, aggregate demand _____
| a. |
falls, which increases real GDP and the price level. |
|
| b. |
increases, which increases real GDP and the price level. |
|
| c. |
falls, which decreases real GDP and increases the price level. |
|
| d. |
increases, which decreases real GDP and increases the price level. |
|
| e. |
increases, which decreases real GDP and the price level. |
Expert Solution
If the short run aggregate supply curve is positively sloped and the Fed increases the money supply, aggregate demand increases which increases real GDP and price level.
As there is an increase in money supply , people will have mor emoney in their hand that will increase the consumption and investment in production that indirectly can increase the agg demand level of the economy and thus the price level and real GDP will go up.
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