Figure 35-4
Use the graph below to answer the following questions.
-Refer to Figure 35-4.If the economy starts at C and the money supply growth rate decreases,in the short run the economy moves to

Question

Figure 35-4
Use the graph below to answer the following questions. 
-Refer to Figure 35-4.If the economy starts at C and the money supply growth rate decreases,in the short run the economy moves to

Quizplus · Accepted Answer

If the money supply growth rate decreases, it will reduce inflationary pressure in the economy. This will cause a leftward shift in the aggregate demand curve from AD1 to AD2. As a result, the equilibrium output level will decrease from Y1 to Y2 and the price level will decrease from P1 to P2. The new equilibrium point is at point B.

Figure 35-4 Use the Graph Below to Answer the Following Questions