Asked by Daniel Amoako on May 11, 2024
Verified
A central bank raises the money supply growth rate and keeps it at that higher rate. Explain the process by which the economy moves to long-run equilibrium.
Money Supply Growth
The rate at which the amount of money available in an economy increases, which can affect inflation and economic stability.
Long-run Equilibrium
Long-run equilibrium is the condition in which all factors of production and inputs in a market are fully adjusted, prices have stabilized, and there is no tendency for change.
- Investigate the prolonged outcomes of variations in the money supply regarding inflation and joblessness.
Verified Answer
ZK
Zybrea KnightMay 16, 2024
Final Answer :
Continued higher money supply growth raises the inflation rate. Firms and workers will come to expect higher inflation and take it into account when setting wages and prices. The increase in expected inflation shifts the short-run Phillips curve to the right.
Learning Objectives
- Investigate the prolonged outcomes of variations in the money supply regarding inflation and joblessness.