Figure 12.3 -Refer to Figure 12.3.Suppose that after a negative supply shock,the economy is at point X in the IS-MP model and at point B on the Phillips curve.If the Bank of Canada has a goal of high employment and therefore does not adjust interest rates,the economy would ________ in the IS-MP model and ________ on the Phillips curve. A) remain at point X; move to point C B) remain at point X; remain at point B C) move to point Z; move to point A D) move to point Z; move to point C

Question

Quizplus · Accepted Answer

If the Bank of Canada does not adjust interest rates, the economy remains at point X in the IS-MP model, and since there is no change in policy to counteract the supply shock, it remains at point B on the Phillips curve.

Figure 12.3 -Refer to Figure 12.3.Suppose That After a Negative Supply Shock,the