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Please explain why this statement is FALSE: In the aggregate demand/aggregate su

ID: 1154345 • Letter: P

Question

Please explain why this statement is FALSE: In the aggregate demand/aggregate supply model, when the central bank sells treasury bonds to commercial banks, the aggregate supply curve will shift to the left.
Please explain why this statement is FALSE: In the aggregate demand/aggregate supply model, when the central bank sells treasury bonds to commercial banks, the aggregate supply curve will shift to the left.
In the aggregate demand/aggregate supply model, when the central bank sells treasury bonds to commercial banks, the aggregate supply curve will shift to the left.

Explanation / Answer

This is True statement:

Selling treasury bonds to commercial bank is part of contractionary monetary policy. it leads to the rise in interest rate in market which discourages business activities and demand.

Thus finally supply curve shifts to left.