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Figure: Monetary Policy and the AD-SRAS Model
-(Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. The economy could move from point g to point f as a result of:
A) an increase in the money supply.
B) a reduction in the discount rate.
C) a decrease in the money supply.
D) purchases of government securities in the open market.

Question

Use the following to answer questions:
Figure: Monetary Policy and the AD-SRAS Model 
-(Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. The economy could move from point g to point f as a result of:
A) an increase in the money supply. 
B) a reduction in the discount rate. 
C) a decrease in the money supply. 
D) purchases of government securities in the open market.

Quizplus · Accepted Answer

A decrease in the money supply would shift the aggregate demand curve to the left, moving the economy from point g to point f, indicating a reduction in overall demand and economic activity.

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