-In the above figure, if we start at AD₁ and SRAS₁, and the money supply increases unexpectedly, what would be the long-run equilibrium?

Question

Quizplus · Accepted Answer

In the long run, an unexpected increase in the money supply shifts the aggregate demand curve to the right, moving the economy from the initial equilibrium (E₁) to a new short-run equilibrium (E₂) and eventually to a new long-run equilibrium (E₃) as the short-run aggregate supply adjusts.

-In the Above Figure, If We Start at AD₁ and SRAS₁