-In the above figure, if the economy is initially at point d, the short-run effect of a cut in the federal funds rate is given by movement from point
A) d to point c, increasing output and decreasing the unemployment rate.
B) d to point b, keeping output and the unemployment rate constant.
C) d to point a, increasing output and decreasing the unemployment rate.
D) d to point b, increasing output and decreasing the unemployment rate.

Question

-In the above figure, if the economy is initially at point d, the short-run effect of a cut in the federal funds rate is given by movement from point
A) d to point c, increasing output and decreasing the unemployment rate. 
B) d to point b, keeping output and the unemployment rate constant. 
C) d to point a, increasing output and decreasing the unemployment rate. 
D) d to point b, increasing output and decreasing the unemployment rate.

Quizplus · Accepted Answer

A cut in the federal funds rate typically lowers interest rates, stimulating investment and consumption, which increases output and decreases the unemployment rate, moving the economy from point d to point c.

-In the Above Figure, If the Economy Is Initially at Point