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Economics (AS & A Level) · Oct / Nov 2023 · Paper 13 · Question 26

9708Monetary policy

The diagram shows the long-run aggregate supply (LRAS) and aggregate demand (AD) curves for an economy. The initial equilibrium is at point X. Which combination of monetary policies will shift the equilibrium position to point Y?

  1. Amoney supply: increase; rate of interest: increase
  2. Bmoney supply: decrease; rate of interest: increase
  3. Cmoney supply: increase; rate of interest: decrease
  4. Dmoney supply: decrease; rate of interest: decrease

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Correct answer: C. money supply: increase; rate of interest: decrease

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