Figure 15.3

-Refer to Figure 15.3 If this economy is initially in a recession, the change in price level which would bring the economy back to full employment would also change the money demand. The change in money demand will change interest rates, which is reflected by the movement from

Question

Figure 15.3

-Refer to Figure 15.3 If this economy is initially in a recession, the change in price level which would bring the economy back to full employment would also change the money demand. The change in money demand will change interest rates, which is reflected by the movement from

Quizplus · Accepted Answer

A movement from r₀ to r₁ indicates a decrease in money demand and an increase in interest rates. This increase in interest rates would help to decrease consumption and increase saving, ultimately leading to a decrease in aggregate demand and a decrease in the price level, which would bring the economy back to full employment.

Figure 15.3 -Refer to Figure 15.3 If This Economy Is Initially in Economy