Figure 17-2
-Refer to Figure 17-2.Suppose the economy is at point C.If the Fed decreases the money supply so that inflation falls,the economy will ________ in the long run,holding all else constant.

Question

Figure 17-2 
-Refer to Figure 17-2.Suppose the economy is at point C.If the Fed decreases the money supply so that inflation falls,the economy will ________ in the long run,holding all else constant.

Quizplus · Accepted Answer

The Fed decreasing the money supply will lead to a decrease in inflation, which will shift the aggregate supply curve to the left. This will lead to a decrease in output and a decrease in the price level, moving the economy to point A in the long run.

Figure 17-2 -Refer to Figure 17-2.Suppose the Economy Is at Point C.If