-In the above figure, the economy is at point A. An increase in oil prices occurs. After the increase in oil prices, the Fed responds by increasing the quantity of money. The economy moves from point A to
A) D to point C.
B) B to point C.
C) C to point D.
D) C to point B.

Question

-In the above figure, the economy is at point A. An increase in oil prices occurs. After the increase in oil prices, the Fed responds by increasing the quantity of money. The economy moves from point A to
A) D to point C. 
B) B to point C. 
C) C to point D. 
D) C to point B.

Quizplus · Accepted Answer

An increase in oil prices typically causes a leftward shift in the short-run aggregate supply curve, moving the economy from point A to point D. The Fed's response of increasing the money supply shifts the aggregate demand curve to the right, moving the economy from point D to point C.

-In the Above Figure, the Economy Is at Point A an Increase