Refer to the information provided in Figure 13.7 below to answer the questions that follow. Figure 13.7
-Refer to Figure 13.7. If the economy is at Point A, a decrease in money supply will move the economy to Point ________ in the short run.

Question

Refer to the information provided in Figure 13.7 below to answer the questions that follow.  Figure 13.7
-Refer to Figure 13.7. If the economy is at Point A, a decrease in money supply will move the economy to Point ________ in the short run.

Quizplus · Accepted Answer

A decrease in money supply would lead to higher interest rates, reducing investment spending, which in turn would decrease aggregate demand. This would move the economy up along the aggregate supply curve to a point with lower output and higher prices in the short run, such as Point B.

Refer to the Information Provided in Figure 13