Figure 14-1
-Refer to Figure 14-1. How would an increase in the money supply move the economy in the short and long run?
A) from C to B in the short run and the long run
B) from C to D in the short run and the long run
C) from C to B in the short run and to A in the long run
D) from C to D in the short run and back to C in the long run

Question

Figure 14-1 
-Refer to Figure 14-1. How would an increase in the money supply move the economy in the short and long run?
A) from C to B in the short run and the long run 
B) from C to D in the short run and the long run 
C) from C to B in the short run and to A in the long run 
D) from C to D in the short run and back to C in the long run

Quizplus · Accepted Answer

An increase in the money supply shifts the LM curve to the right, lowering the interest rate and increasing output in the short run from point C to point B. In the long run, the increase in output causes an increase in the price level, shifting the LM back to the original position, but with a higher price level, resulting in a movement to point A.

Figure 14-1 -Refer to Figure 14-1. How Would an Increase in the Increase