Final answer:
Increasing the money supply stimulates spending and leads to higher output in the long run by impacting factors like aggregate demand and monetary policy.
Explanation:
True: An increase in the money supply causes output to rise in the long run. When the money supply increases, it stimulates spending, which leads to an increase in output and income. This is known as the quantity theory of money.
Aggregate Demand: Increasing the money supply shifts the Aggregate Demand curve to the right, resulting in higher prices and potentially more output. This is a long-term effect that is influenced by factors like unemployment levels in the economy.
Monetary Policy: Increasing the money supply leads to a shift in the LM curve, lower interest rates, and higher output. This monetary stimulus can have long-term inflationary effects.
Learn more about Impact of Money Supply on Output in the Long Run here:
https://brainly.com/question/35077519
