In the short run, an increase in money supply leads to an increase in price level along the AS curve. The initial equilibrium of the economy is at full - employment. The rise in price level is on account of
1
output decline followed by increase in wages, which is passed on to price level.
2
output increase causing an increase in wages which is passed on to price level.
3
output remaining same, but with an increase in wages, which is passed on into price level.
4
output and wages remaining same, but expectations leading to an increase in price level.