Use the two graphs in the diagram to answer the following questions.
Figure 35-3

-Refer to Figure 35-3.Starting from c and 3,in the short run,an unexpected decrease in money supply growth moves the economy to

Question

Use the two graphs in the diagram to answer the following questions.
Figure 35-3
 
-Refer to Figure 35-3.Starting from c and 3,in the short run,an unexpected decrease in money supply growth moves the economy to

Quizplus · Accepted Answer

Starting from point c and 3, an unexpected decrease in money supply growth causes a contraction in the economy, which leads to a decrease in both output and price level. This movement is shown by the short-run Phillips curve shifting upward, moving from c to b. The output falls from 3 to 2, and the price level falls from c to b as well. Therefore, the new equilibrium point is b and 2 in the short run.

Use the Two Graphs in the Diagram to Answer the Following