Figure 35-5
Use the two graphs in the diagram to answer the following questions.
-Refer to Figure 35-5.Starting from C and 3,in the long run,a decrease in money supply growth moves the economy to

Question

Figure 35-5
Use the two graphs in the diagram to answer the following questions.  
-Refer to Figure 35-5.Starting from C and 3,in the long run,a decrease in money supply growth moves the economy to

Quizplus · Accepted Answer

A decrease in money supply growth would cause a decrease in inflation and thus a decrease in nominal interest rates. This would lead to an increase in investment and a shift to the right along the production possibilities curve (PPC). As the economy moves towards point A, both inflation and real GDP would decrease.

Figure 35-5 Use the Two Graphs in the Diagram to Answer the Answer