Figure 15-1

-Refer to Figure 15-1. An increase in the money supply would move the economy from C to
A) B in the short run and the long run.
B) D in the short run and the long run.
C) B in the short run and A in the long run.
D) D in the short run and C in the long run.

Question

Figure 15-1
 
-Refer to Figure 15-1. An increase in the money supply would move the economy from C to
A) B in the short run and the long run. 
B) D in the short run and the long run. 
C) B in the short run and A in the long run. 
D) D in the short run and C in the long run.

Quizplus · Accepted Answer

An increase in the money supply would shift the AD curve to the right, leading to an increase in output and prices in the short run. This would move the economy from point C to point B. In the long run, prices would adjust, and the economy would move back to its natural level of output, represented by the LRAS curve. Therefore, the economy would end up at point A, which is a higher level of output and prices compared to the original equilibrium at point C.

Figure 15-1 -Refer to Figure 15-1. an Increase in the Money Supply