Figure 17-2
-Refer to Figure 17-2. Suppose the economy is initially at point c. If the money supply growth rate decreases, where does the economy move to in the short-run?

Question

Figure 17-2 
-Refer to Figure 17-2. Suppose the economy is initially at point c. If the money supply growth rate decreases, where does the economy move to in the short-run?

Quizplus · Accepted Answer

When the money supply growth rate decreases, it leads to higher interest rates in the short run, which reduces investment and spending, causing the economy to move to a point with lower output and higher unemployment, such as point b.

Figure 17-2 -Refer to Figure 17-2. Suppose the Economy Is Initially at Is