Exhibit 15-1 -Refer to the Graph in the Exhibit.According to Policymakers Who

question 60

Multiple Choice

Exhibit 15-1

-Refer to the graph in the exhibit.According to policymakers who favour an active approach to policy, how can the economy attain equilibrium at potential output?  

• A) by shifting the SRAS curve to the left
• B) by shifting the SRAS curve to the right
• C) by increasing the money supply or by increasing government spending
• D) by decreasing the money supply or by decreasing government spending

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Definitions:

Money Supply

The complete sum of financial resources present within an economy at a given moment, encompassing cash, coins, and the funds available in checking and savings accounts.

M1

A category of the money supply that includes all physical money like coins and currency, as well as demand deposits, checking accounts, and negotiable order of withdrawal (NOW) accounts.

M2

A measure of the money supply that includes cash, checking deposits, and easily convertible near money.

Monetary Policy

The method used by a country's monetary authority to regulate the amount of money in circulation, typically aiming at a specific inflation or interest rate to promote economic stability and expansion.