When the Fed Decreases the Money Supply

question 143

Multiple Choice

When the Fed decreases the money supply:

• A)aggregate demand and aggregate supply both increase.
• B)aggregate demand increases,which leads to movement along the short-run aggregate supply curve.
• C)aggregate demand decreases,which leads to movement along the short-run aggregate supply curve.
• D)aggregate supply increases,which leads to movement along the aggregate demand curve.
• E)aggregate supply decreases,which leads to movement along the aggregate demand curve.

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Definitions:

Producer Surplus

The difference between the amount producers are willing and able to supply a good for and the actual amount they receive (market price).

Consumer Surplus

Consumer surplus is the difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually do pay.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, often seen as a measure of producer welfare.