Suppose That the Central Bank Must Follow a Rule That

Multiple Choice

Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises.If the economy starts from long-run equilibrium and aggregate demand shifts right,the central bank must

A) decrease the money supply,which shifts aggregate demand further right.
B) decrease the money supply,which shifts aggregate demand left.
C) increase the money supply,which shifts aggregate demand further right.
D) increase the money supply,which shifts aggregate demand left.