Consider the exhibit below for the following questions.
Figure 33-1
-Refer to Figure 33-1.An increase in the money supply would move the economy from C to
A) B in the short run and the long run.
B) D in the short run and the long run.
C) B in the short run and A in the long run.
D) D in the short run and C in the long run.

Question

Consider the exhibit below for the following questions.
Figure 33-1 
-Refer to Figure 33-1.An increase in the money supply would move the economy from C to
A) B in the short run and the long run. 
B) D in the short run and the long run. 
C) B in the short run and A in the long run. 
D) D in the short run and C in the long run.

Quizplus · Accepted Answer

An increase in the money supply would shift the aggregate demand curve to the right. This would lead to both a short-run and long-run increase in output and prices, moving the economy from point C to point B in the short run, and then from point B to point A in the long run as prices adjust.

Consider the Exhibit Below for the Following Questions