Question: How would a decrease in the money supply affect aggregate demand and aggregate supply, assuming the central bank s primary objective is to control inflation?
How would a decrease in the money supply affect aggregate demand and aggregate supply, assuming the central banks primary objective is to control inflation?
Question Answer
a
Aggregate demand would shift right, leading to higher output and prices, while aggregate supply shifts left
b
Aggregate demand would shift left, leading to lower output and prices, while aggregate supply remains unchanged
c
Aggregate demand and aggregate supply would both shift to the right, leading to higher output and prices
d
Aggregate supply would shift right, leading to higher output and lower prices, while aggregate demand remains unchanged
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