Figure 16-2
-Refer to Figure 16-2. If the economy starts at c and the money supply growth rate increases, where does the economy move to in the short run?

Question

Figure 16-2 
-Refer to Figure 16-2. If the economy starts at c and the money supply growth rate increases, where does the economy move to in the short run?

Quizplus · Accepted Answer

As the money supply growth rate increases, the LM curve shifts to the right. This lowers the interest rate and increases investment, GDP and employment. Therefore, the economy moves from point c to point b.

Figure 16-2 -Refer to Figure 16-2. If the Economy Starts at C