Figure 14-3
-In Figure 14-3,assume the economy is in equilibrium at point d.If the Bank of Canada decreases the money supply so that the new aggregate demand curve is A D₁,then,in the short run,the new price level will be

Question

Figure 14-3 
-In Figure 14-3,assume the economy is in equilibrium at point d.If the Bank of Canada decreases the money supply so that the new aggregate demand curve is A D₁,then,in the short run,the new price level will be

Quizplus · Accepted Answer

The decrease in the money supply will shift the aggregate demand curve to the left, resulting in a lower price level. The new price level will be at point e, which is below the original price level of 120.

Figure 14-3 -In Figure 14-3,assume the Economy Is in Equilibrium at Point