Figure 17-3
-Refer to Figure 17-3. When would the economy move from c and 3 to b and 2?
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 increased
D) in the long run if money supply growth decreased

Question

Figure 17-3 
-Refer to Figure 17-3. When would the economy move from c and 3 to b and 2?
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 increased 
D) in the long run if money supply growth decreased

Quizplus · Accepted Answer

The economy would move from c and 3 to b and 2 in the short run if money supply growth decreased unexpectedly. This is because a decrease in the money supply growth rate would lead to higher interest rates in the short run, reducing investment spending and shifting the economy to a lower point of aggregate demand and output.

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