In the short run, an increase in the money supply is likely to lead to a. lower unemployment and lower inflation. b. lower unemployment and higher inflation. c. higher unemployment and lower inflation. d. higher unemployment and higher inflation.

. b. lower unemployment and higher inflation.

Explanation:

An increase in the money supply increases access to cash by individuals and firms. Credit facilities become available are attractive rates, which encourages borrowing for consumption and investment expenditures. As households and firms borrow to spend, the aggregate demand increases, leading to a rise in inflation.

An increase in the money supply makes it possible for businesses to borrow at friendly rates. They use the credit to expand and grow their businesses. As production increases,  additional workers are required, thereby creating job opportunities. When credit is accessible, individuals borrow to establish start-up businesses. As firms expand and new ones come up, Job opportunities are created, leading to a reduction in the unemployment rate.

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