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

Question

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

Quizplus · Accepted Answer

Expansionary monetary policy lowers interest rates, stimulating investment and increasing aggregate demand, moving the economy to point d in the short run due to higher output and price levels. Over time, as prices adjust, the economy moves to point h in the long run, where output returns to its natural level but at a higher price level.

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