Consider the exhibit below for the following questions.Figure 20-1
-Refer to Figure 20-1. If the economy starts at C, an increase in the money supply moves the economy
A)to A in the long run.
B)to B in the long run.
C)back to C in the long run.
D)to D in the long run.

Question

Consider the exhibit below for the following questions.Figure 20-1 
-Refer to Figure 20-1. If the economy starts at C, an increase in the money supply moves the economy
A)to A in the long run. 
B)to B in the long run. 
C)back to C in the long run. 
D)to D in the long run.

Quizplus · Accepted Answer

An increase in the money supply shifts the aggregate demand curve to the right, moving the economy from C to A in the short run. In the long run, the economy will move back to its natural level of output, which is at point B.

Consider the Exhibit Below for the Following Questions