Use the figure below to answer the following questions.

Figure 28.3.1
-Refer to Figure 28.3.1.Suppose the economy moves from point A to point C.According to the monetarist theory of the business cycle,what could have caused this movement?

Question

Use the figure below to answer the following questions.
  
Figure 28.3.1
-Refer to Figure 28.3.1.Suppose the economy moves from point A to point C.According to the monetarist theory of the business cycle,what could have caused this movement?

Quizplus · Accepted Answer

According to the monetarist theory of the business cycle, changes in the quantity of money affect aggregate demand and ultimately output and employment levels. An increase in the growth rate of the quantity of money would shift the aggregate demand curve to the right, leading to an increase in output and employment levels, as represented by the movement from A to C. A decrease in the growth rate of the quantity of money would have the opposite effect, shifting the aggregate demand curve to the left and leading to a decrease in output and employment levels.

Use the Figure Below to Answer the Following Questions