Figure 11-5
-Refer to Figure 11-5. If the economy is at point c, an open market purchase would cause

Question

Figure 11-5 
-Refer to Figure 11-5. If the economy is at point c, an open market purchase would cause

Quizplus · Accepted Answer

An open market purchase by the central bank would result in an increase in the money supply, which would lower interest rates and increase investment and consumption spending. This would cause an increase in aggregate demand, shifting the AD curve from AD₁ to AD₂. This would result in an increase in real GDP and the price level, moving the economy closer to the full-employment level of output. A shift in the short-run aggregate supply curve is not likely to occur as a result of an open market purchase.

Figure 11-5 -Refer to Figure 11-5. If the Economy Is at Point