Figure 35-2
Use the pair of diagrams below to answer the following questions.
-Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,a decrease in the money supply moves the economy to
A)E and 1.
B)D and 2.
C)D and 3.
D)None of the above is correct.

Question

Figure 35-2
Use the pair of diagrams below to answer the following questions. 
-Refer to Figure 35-2.If the economy starts at C and 1,then in the short run,a decrease in the money supply moves the economy to
A)E and 1. 
B)D and 2. 
C)D and 3. 
D)None of the above is correct.

Quizplus · Accepted Answer

A decrease in the money supply shifts the LM curve to the left, which intersects the AD curve at a lower level of output and a higher interest rate.

Figure 35-2 Use the Pair of Diagrams Below to Answer the Following