Figure 9.1 -Refer to Figure 9.1. An increase in the money supply causes: A) the aggregate demand curve to shift from AD₁to AD₂. B) the aggregate demand curve to shift from AD₁to AD₀. C) the economy to move from Point A to Point B, but will not shift the aggregate demand curve. D) neither a shift of the aggregate demand curve nor a change in real GDP.

Question

Quizplus · Accepted Answer

An increase in the money supply shifts the aggregate demand curve to the right, which is represented as a movement from ADS1U1B11S1U1B0S1U1B1 to ADS1U1B12S1U1B0, as shown in the graph. This leads to an increase in both real GDP and the price level.

Figure 9.1 -Refer to Figure 9.1. an Increase in the Money Supply