Figure 17-5
Use the graph below to answer the following questions.

-Refer to Figure 17-5. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

Question

Figure 17-5
Use the graph below to answer the following questions.
 
-Refer to Figure 17-5. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

Quizplus · Accepted Answer

An increase in the money supply growth rate shifts the AD curve to the right. Starting at point C, the economy initially moves from C to B along the SRAS curve, as the increase in demand leads to higher output and prices. However, in the long run, prices adjust, and the economy returns to its original equilibrium point at C, but with a higher price level. Thus, in the short run, the economy moves to point B. Points D and F are not consistent with an increase in the money supply growth rate, as they are to the left of point C on the SRAS curve.

Figure 17-5 Use the Graph Below to Answer the Following Questions