单选题 For an economy operating at full employment, the major long-term impact of increasing the money supply will be:

A. lower interest rates.
B. higher output.
C. higher prices.

【正确答案】 C

【答案解析】The quantity theory of money should be used to answer this question. Thus, we use the relationship MV = PY, where we always assume that V is constant and, at full employment, Y is also fixed. So, if M increases, P must also increase.