Figure 17-4
-Refer to Figure 17-4. If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy, then the economy will move to which point in the short run?

Question

Figure 17-4 
-Refer to Figure 17-4. If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy, then the economy will move to which point in the short run?

Quizplus · Accepted Answer

An expansionary monetary policy would involve lowering interest rates, which would increase investment and aggregate demand. This would shift the AD curve to the right, resulting in a movement to point b in the short run.

Figure 17-4 -Refer to Figure 17-4. If the Economy Is at Point