Suppose the economy is in long-run equilibrium. Then, suppose theCentral Banksuddenlyincreases the money supply.

A.Describe the initial impact of this event in the model of aggregate demand and aggregatesupply by explaining which curve shifts and which way.

B.What happens to the price level and real output in the short run?

C.If the economy is allowed to adjust to the increase in the money supply, what happens to theprice level and real output in the long run (compared to their original levels)?

D.Does an increase in the money supply move output above the natural rate indefinitely? Why?