-In the above figure, if initial equilibrium is at point A and there is a fully anticipated increase in aggregate demand from AD1 to AD2 due to an anticipated increase in the money supply, then
A) the economy will move directly from point A to point C without passing through point B.
B) the economy will move directly from point A to point B, and will remain at point B in the long run.
C) the price level will shift to P2 in the short run.
D) the price level will shift to P2 in the long run.

Question

-In the above figure, if initial equilibrium is at point A and there is a fully anticipated increase in aggregate demand from AD1 to AD2 due to an anticipated increase in the money supply, then
A) the economy will move directly from point A to point C without passing through point B. 
B) the economy will move directly from point A to point B, and will remain at point B in the long run. 
C) the price level will shift to P2 in the short run. 
D) the price level will shift to P2 in the long run.

Quizplus · Accepted Answer

The Answer of 
-In the above figure, if initial equilibrium is at point A and there is a fully anticipated increase in aggregate demand from AD1 to AD2 due to an anticipated increase in the money supply, then
A) the economy will move directly from point A to point C without passing through point B. 
B) the economy will move directly from point A to point B, and will remain at point B in the long run. 
C) the price level will shift to P2 in the short run. 
D) the price level will shift to P2 in the long run.

-In the Above Figure, If Initial Equilibrium Is at Point