Figure 26-13
-Refer to Figure 26-13. In the figure above, if the economy in Year 1 is at point A and is expected in Year 2 to be at point B, then the appropriate monetary policy by the Federal Reserve would be to
A) lower interest rates.
B) raise interest rates.
C) lower income taxes.
D) raise income taxes.

Question

Figure 26-13 
-Refer to Figure 26-13. In the figure above, if the economy in Year 1 is at point A and is expected in Year 2 to be at point B, then the appropriate monetary policy by the Federal Reserve would be to
A) lower interest rates. 
B) raise interest rates. 
C) lower income taxes. 
D) raise income taxes.

Quizplus · Accepted Answer

If the economy is moving from point A to point B, it likely indicates an overheating economy or rising inflation. Raising interest rates would help cool down the economy by making borrowing more expensive, thus reducing spending and investment.

Figure 26-13 -Refer to Figure 26-13. in the Figure Above, If the Above