Question

As a result of an increase in the growth rate of the money supply: __________

both the real growth and the inflation rate increase only in the short run.
real GDP growth increases only in the long run, and the inflation rate increases only in the short run. real GDP growth increases in both the short run and the long run, and the inflation rate increases only in the short run.
real GDP growth increases only in the short run, and the inflation rate increases in both the short run and the long run.

Answer 1

Real GDP growth increases only in the short run, and the inflation rate increases in both the short run and the long run.

Step-by-step explanation:

An increase in the growth rate of money supply will result in an increase in inflation in both the short run and the long run.

Long run growth of the real GDP growth depends on the effective use of resources and technology, not the money supply.

A small increase in the money supply is always needed to support economic growth, that is why one of the few ideas that most economists agree upon is that the inflation rate should be between 1.5 - 2% per year.