Exhibit 20-4 Aggregate demand and supply model

-In Exhibit 20-4,which one of the following actions could the Fed use to shift the AD curve from AD₃ to AD₂?

Question

Exhibit 20-4 Aggregate demand and supply model
 
-In Exhibit 20-4,which one of the following actions could the Fed use to shift the AD curve from AD₃ to AD₂?

Quizplus · Accepted Answer

Selling government securities is a contractionary monetary policy action that decreases the money supply, leading to higher interest rates and a decrease in aggregate demand, thus shifting the AD curve from AD₃ to AD₂.

Exhibit 20-4 Aggregate Demand and Supply Model