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In the short run, an unexpected decrease in the money supply results in an increase in the inflation rate and the unemployment rate. On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the decrease in the money supply.UNEMPLOYMENT RATE (Percent)L 1In the long run, the decrease in the money supply results in an increase in the inflation rate and the unemployment rate relative to the economy's initial equilibrium.
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