Figure 11-6
-Refer to Figure 11-6. If rational expectations exist and the economy is initially operating at
Point d. If the Fed undertakes contractionary monetary policy the economy will
A) spend some time at c with a recessionary gap.
B) spend no time at c and move directly to b.
C) bypass c and move to a, because the short-run aggregate supply curve shifts to the left.
D) bypass c and move to a, because the short-run aggregate supply curve shifts immediately to the right and the economy moves down the long-run aggregate supply curve.

Question

Figure 11-6 
-Refer to Figure 11-6. If rational expectations exist and the economy is initially operating at
Point d. If the Fed undertakes contractionary monetary policy the economy will
A) spend some time at c with a recessionary gap. 
B) spend no time at c and move directly to b. 
C) bypass c and move to a, because the short-run aggregate supply curve shifts to the left. 
D) bypass c and move to a, because the short-run aggregate supply curve shifts immediately to the right and the economy moves down the long-run aggregate supply curve.

Quizplus · Accepted Answer

The Answer of Figure 11-6 
-Refer to Figure 11-6. If rational expectations exist and the economy is initially operating at
Point d. If the Fed undertakes contractionary monetary policy the economy will
A) spend some time at c with a recessionary gap. 
B) spend no time at c and move directly to b. 
C) bypass c and move to a, because the short-run aggregate supply curve shifts to the left. 
D) bypass c and move to a, because the short-run aggregate supply curve shifts immediately to the right and the economy moves down the long-run aggregate supply curve.

Figure 11-6 -Refer to Figure 11-6. If Rational Expectations Exist and the Exist