The short-run effect of an increase in the supply of money is A. an increase in both real Gross Domestic Product (GDP) and the
price level. B. an increase in the price level but not in real Gross Domestic Product (GDP). C. an increase in the price level, a decrease in real Gross Domestic Product (GDP), but an increase in nominal national income. D. an increase in real Gross Domestic Product (GDP) but not in the price level.
A. an increase in both real Gross Domestic Product (GDP) and the price level.
Explanation:
Based on various economic theories, the short-run effect of an increase in the supply of money leads to increased or more availability of money for lending and borrowing, and higher rates of spending, which then equates to more production level at local markets and thereby ultimately lead to increased in country's GDP (Gross Domestic Product)
Hence, in this case, the correct answer is "A. an increase in both real Gross Domestic Product (GDP) and the price level."
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