-In the above figure, if we start at AD1 and SRAS1, and the money supply increases unexpectedly, what would be the short-run equilibrium even with rational expectations?

Question

Quizplus · Accepted Answer

In the short run, an unexpected increase in the money supply shifts the aggregate demand curve to the right, moving the economy from AD1 to a new equilibrium at E2, even with rational expectations.

-In the Above Figure, If We Start at AD1 and SRAS1