In the short-run, a temporary increase in money supply A) ...

[genevieve1028]

In the short-run, a temporary increase in money supply
 
  A) shifts the DD curve to the right, increases output and appreciates the currency.
  B) shifts the AA curve to the left, increases output and depreciates the currency.
  C) shifts the AA curve to the left, decreases output and depreciates the currency.
  D) shifts the AA curve to the left, increases output and appreciates the currency.
  E) shifts the AA curve to the right, increases output and depreciates the currency.

Question 2

Using a figure show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run.
 
  What will be an ideal response?

[brittanywood]

Answer to Question 1

E

Answer to Question 2

A temporarily fiscal expansion will move the economy from DD1 to DD2, and output increases. A permanent fiscal expansion will also shift the AA curve to the left and down. The nominal exchange rate appreciates, i.e. E decreases.

[genevieve1028]

Thank you

[brittanywood]

Happy to help you