Figure 10-8
-Refer to Figure 10-8. If the economy is at point c, the Federal Reserve can close the output gap

Question

Figure 10-8 
-Refer to Figure 10-8. If the economy is at point c, the Federal Reserve can close the output gap

Quizplus · Accepted Answer

If the economy is at point c, it indicates a recessionary gap where output is below potential. The Federal Reserve can close this gap by pursuing an expansionary monetary policy, which involves lowering interest rates to stimulate borrowing and spending, thereby increasing aggregate demand.

Figure 10-8 -Refer to Figure 10-8. If the Economy Is at Point