Figure 16-7
-Refer to Figure 16-7. Suppose initially the economy was at point 1 and as a result of Jstabilization policies, it is now at point 3. Consequently, there will be pressure for
A) workers to settle for lower nominal wages.
B) firms to decrease prices.
C) workers and firms to incorporate price increases into their expectations.
D) the Fed to buy bonds in the open market.

Question

Figure 16-7 
-Refer to Figure 16-7. Suppose initially the economy was at point 1 and as a result of Jstabilization policies, it is now at point 3. Consequently, there will be pressure for
A) workers to settle for lower nominal wages. 
B) firms to decrease prices. 
C) workers and firms to incorporate price increases into their expectations. 
D) the Fed to buy bonds in the open market.

Quizplus · Accepted Answer

When the economy moves from point 1 to point 3 due to stabilization policies, it typically indicates an increase in demand or inflationary pressure. As a result, workers and firms will likely incorporate these price increases into their expectations, anticipating higher future prices.

Figure 16-7 -Refer to Figure 16-7. Suppose Initially the Economy Was at Economy