Figure 16-3
-Refer to Figure 16-3. Starting from c and 3, in the short run, where does an unexpected decrease in money supply growth move the economy to?
A)a and 1
B)b and 2
C)back to c and 3
D)d and 4

Question

Figure 16-3 
-Refer to Figure 16-3. Starting from c and 3, in the short run, where does an unexpected decrease in money supply growth move the economy to?
A)a and 1 
B)b and 2 
C)back to c and 3 
D)d and 4

Quizplus · Accepted Answer

An unexpected decrease in money supply growth shifts the AD curve to the left from AD1 to AD2. This causes a lower equilibrium level of output (from Y1 to Y2) and a higher equilibrium price level (from P1 to P2). The economy moves from point c and 3 to point b and 2 in the short run.

Figure 16-3 -Refer to Figure 16-3. Starting from C and 3, in and 3