Figure 11-6

-Refer to Figure 11-6.Suppose the economy is operating at "a".Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at ______.They rationally adjust their behavior and the _______ curve shifts to the left and _______ becomes the new equilibrium point.

Question

Figure 11-6
 
-Refer to Figure 11-6.Suppose the economy is operating at "a".Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at ______.They rationally adjust their behavior and the _______ curve shifts to the left and _______ becomes the new equilibrium point.

Quizplus · Accepted Answer

The expansionary monetary policy will increase the money supply which will shift the aggregate demand curve to the right. This will push the economy from point "a" to a new equilibrium point, most likely somewhere along the short-run aggregate supply curve. Therefore, the options that mention the aggregate demand curve as the curve that shifts are not correct. Option C correctly identifies the short-run aggregate supply curve as the curve that will shift, and the new equilibrium point will be at point "d".

Figure 11-6 -Refer to Figure 11-6.Suppose the Economy Is Operating at "A".Some