Figure 15-1

-Refer to Figure 15-1. If the economy starts at C, an increase in the money supply moves the economy
A) to A in the long run.
B) to B in the long run.
C) back to C in the long run.
D) to D in the long run.

Question

Figure 15-1
 
-Refer to Figure 15-1. If the economy starts at C, an increase in the money supply moves the economy
A) to A in the long run. 
B) to B in the long run. 
C) back to C in the long run. 
D) to D in the long run.

Quizplus · Accepted Answer

An increase in the money supply shifts the aggregate demand curve to the right, moving the economy from C to A in the short run. In the long run, the economy will move back to its natural level of output, which is at point B.

Figure 15-1 -Refer to Figure 15-1. If the Economy Starts at C