What will happen to output and cost level in short-run

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Q. Judging by impact of money supply on nominal and real wages, is this analysis consistent with proposition that money has real effects in short run however is neutral in long run? Yes, this analysis is consistent with long-run monetary neutrality. In long run, an increase in money supply causes an increase in nominal wage, however leaves real wage unchanged. (b) Assume Fed expands money supply, however because public expect this Fed action, it simultaneously raises its expectation of cost level. Illustrate what will happen to output and cost level in short run?

Reference no: EM1367399

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