-In the above figure, assume the economy starts out in equilibrium at point d. If the Fed increases the money supply so that the new aggregate demand curve is AD₃, then the new short-run equilibrium will be at point

Question

Quizplus · Accepted Answer

Increasing the money supply shifts the aggregate demand curve to the right. If the new aggregate demand curve is AD3, the economy moves to a new short-run equilibrium at point c, where the new AD curve intersects the short-run aggregate supply curve.

-In the Above Figure, Assume the Economy Starts Out in Equilibrium