Use the following diagram to answer the following questions.

-Refer to Diagram 13-1. If the economy is currently in equilibrium at point B, increasing the money supply would:

Question

Use the following diagram to answer the following questions.
 
-Refer to Diagram 13-1. If the economy is currently in equilibrium at point B, increasing the money supply would:

Quizplus · Accepted Answer

Increasing the money supply shifts the AD curve to the right, leading to an increase in the equilibrium level of real GDP and the equilibrium price level. This can be seen in the diagram as a shift of the AD curve from AD1 to AD2, causing the new equilibrium point to move from point B to point C, where both real GDP and price level have increased.

Use the Following Diagram to Answer the Following Questions