Figure 15-2
-In Figure 15-2,suppose the economy is initially at a short run equilibrium at point B and there is an unanticipated decrease in the money supply.Which point represents the new short run equilibrium?

Question

Figure 15-2 
-In Figure 15-2,suppose the economy is initially at a short run equilibrium at point B and there is an unanticipated decrease in the money supply.Which point represents the new short run equilibrium?

Quizplus · Accepted Answer

An unanticipated decrease in the money supply would lead to higher interest rates, reducing investment spending and shifting the aggregate demand curve to the left. This would move the economy from point B to a new short-run equilibrium at a lower output and higher price level, which is represented by point A.

Figure 15-2 -In Figure 15-2,suppose the Economy Is Initially at a Short