Figure 10-8
-Refer to Figure 10-8. Assume that the economy is at point b. A decrease in the money supply would cause

Question

Figure 10-8 
-Refer to Figure 10-8. Assume that the economy is at point b. A decrease in the money supply would cause

Quizplus · Accepted Answer

A decrease in the money supply would cause a shift of the aggregate demand curve to the left, from AD₂ to AD₁, as consumers and firms will have less money to spend. This will result in a decrease in output and prices in the short run, causing a movement up along the short run aggregate supply curve from point b to point a.

Figure 10-8 -Refer to Figure 10-8. Assume That the Economy Is at Economy