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Unanticipated Increase in Money Supply

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What impact will an unanticipated increase in the money supply have on the real interest rate, real output, and employment in the short run? How will expansionary monetary policy affect these factors in the long run? Explain.

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Solution Summary

This solution explains what happens to the real interest rate the real output and employment rates as the result of an unanticipated increase in the money supply by the Federal Reserve.

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The following explanation pertains to an unexpected expansionary monetary policy:

The Fed increases ...

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