Figure 16-1
-Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does a decrease in the money supply growth rate move the economy?

Question

Figure 16-1 
-Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does a decrease in the money supply growth rate move the economy?

Quizplus · Accepted Answer

A decrease in the money supply growth rate will decrease aggregate demand, causing a leftward shift along the AD curve from c to d. In the short run, prices are sticky, so output decreases from Y1 to Y3 along the SRAS curve. Therefore, the economy will move to point d and 3.

Figure 16-1 -Refer to the Figure 16-1.If the Economy Starts at C