If the Fed Decreases the Money Supply

question 184

Multiple Choice

If 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:

Aggregate Supply

The aggregate amount of products and services generated inside an economy, measured at a specific overall price level during a defined timeframe.

Technological Progress

The overall process of invention, innovation, and diffusion of technology or processes, which typically contributes to economic growth.

Aggregate Demand

The totality of market demand for goods and services within an economy, set at an agreed-upon general price level over an established period.

Money Supply

The total fiscal assets present in an economy at a specific moment.