Refer to Exhibit 6. Assume the economy is initially at long-run equilibrium at point E. Over time, how will a monetary contraction affect the economy's position on the graph?

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It will shift towards point FIt will move in the direction of point aIt will progress towards point HIt will head towards point INo change in position

Explanation

Starting from long-run equilibrium at point E, a monetary contraction causes the economy to adjust and move towards point H as it seeks a new equilibrium.