Use the following to answer questions:
-(Figure: Monetary Policy and the AD-SRAS Model)Refer to Figure: Monetary Policy and the AD-SRAS Model.The economy could move from point g to point f as a result of:

Question

Use the following to answer questions: 
-(Figure: Monetary Policy and the AD-SRAS Model)Refer to Figure: Monetary Policy and the AD-SRAS Model.The economy could move from point g to point f as a result of:

Quizplus · Accepted Answer

Moving from point g to point f requires a decrease in aggregate demand, which can be caused by a decrease in the money supply (choice C). An increase in the money supply (choice A) would shift the AD curve to the right, moving the economy further away from point f. A reduction in the bank rate (choice B) would also stimulate demand and move the economy further away from point f. The purchase of government securities in the open market (choice D) would decrease interest rates and stimulate demand, also moving the economy further away from point f.

Use the Following to Answer Questions