According to the misperceptions theory,an unanticipated decrease in the money supply shifts the AD curve to the ________,causing output to ________ in the short run.
A)right;rise
B)right;fall
C)left;rise
D)left;fall

Question

Quizplus · Accepted Answer

According to the misperceptions theory, individuals have incorrect perceptions about changes in the aggregate price level, and may initially believe a decrease in the money supply is a decrease in the relative price of goods, causing an increase in output. As a result, the AD curve shifts to the left, causing output to fall in the short run.

According to the Misperceptions Theory,an Unanticipated Decrease in the Money