Use the following diagram to answer the following questions.

-Refer to Diagram 14-1. Suppose the economy moves from equilibrium at point B to equilibrium at point C. In this instance, the monetary authorities are most likely:

Question

Use the following diagram to answer the following questions.
 
-Refer to Diagram 14-1. Suppose the economy moves from equilibrium at point B to equilibrium at point C. In this instance, the monetary authorities are most likely:

Quizplus · Accepted Answer

Moving from point B to point C in a typical economic diagram that represents monetary policy effects usually indicates an increase in the price level and possibly an increase in output, which can be interpreted as inflationary pressure. This scenario is most consistent with the monetary authorities allowing the money supply to grow at a faster rate than real GDP, which can lead to inflation.

Use the Following Diagram to Answer the Following Questions