How Might Changes in the Money Supply Be Non-Neutral in the Short

question 32

Multiple Choice

How might changes in the money supply be non-neutral in the short run?

• A) As the amount of money circulating in the economy changes before prices respond, consumers' purchases change accordingly, which leads producers to change production levels.
• B) When money supply changes in the short run, it will affect nominal, but not real, variables in the short run.
• C) As money growth increases at a faster rate, it will cause real GDP to grow at an equally faster rate.
• D) If producers expect inflation to increase, they will increase supply in order to sell before the arrival of inflation.

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