Figure 16-2

-Refer to the Figure 16-2.Suppose the economy is initially at point c. If the money supply growth rate decreases, where does the economy move to in the short-run?

Question

Figure 16-2
 
-Refer to the Figure 16-2.Suppose the economy is initially at point c. If the money supply growth rate decreases, where does the economy move to in the short-run?

Quizplus · Accepted Answer

In the short-run, a decrease in the money supply growth rate typically leads to lower aggregate demand, causing the economy to move to a point with lower output and possibly lower inflation, such as point b.

Figure 16-2 -Refer to the Figure 16-2.Suppose the Economy Is Initially at Economy