The three figures below show the phases of a disinflation. In part i) , the economy is experiencing a sustained inflation at E 1.
FIGURE 29-4
-Refer to Figure 29-4, part ii) or iii) . A movement of the economy from E3 to E2 could be due to
A) a slow fall in wages due to the recessionary gap.
B) an expansionary monetary policy.
C) a contractionary monetary policy.
D) a rise in unit costs caused by falling wages.
E) a positive aggregate demand shock.
Correct Answer:
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