Figure 17-3
-Refer to Figure 17-3. When would the economy move from c and 3 to e and 5?
A) in the short run if money supply growth increased unexpectedly
B) in the short run if money supply growth decreased unexpectedly
C) in the long run if money supply growth increases
D) in the long run if money supply growth decreases

Question

Figure 17-3 
-Refer to Figure 17-3. When would the economy move from c and 3 to e and 5?
A) in the short run if money supply growth increased unexpectedly 
B) in the short run if money supply growth decreased unexpectedly 
C) in the long run if money supply growth increases 
D) in the long run if money supply growth decreases

Quizplus · Accepted Answer

In the long run, if money supply growth increases, the economy will move from c and 3 to e and 5. This is because an increase in money supply growth will lead to an increase in aggregate demand, which will shift the AD curve to the right. As a result, the equilibrium price level will increase and the equilibrium quantity of output will increase.

Figure 17-3 -Refer to Figure 17-3. When Would the Economy Move from Economy