Asked by Bailey Glover on Apr 28, 2024

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In the long run,increases in the money supply increase the economy's potential output level.

Money Supply

The complete collection of economic resources in money form available at a distinct period within an economy, which includes cash—both coins and notes—and amounts held in banking accounts for checking and savings.

Potential Output Level

The highest level of real gross domestic product (GDP) that can be sustained over the long term without increasing the rate of inflation.

  • Comprehend the impact of monetary policy on total demand and real Gross Domestic Product.
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RJ
Ryan James BayerMay 02, 2024
Final Answer :
False
Explanation :
Increases in the money supply only result in short-term increases in output level, as the increased money supply causes inflation and decreases the purchasing power of money. In the long run, inflationary pressures can lead to a decrease in investment and growth, therefore decreasing potential output level.