-In the above figure, if the economy is initially at point a, the short-run effect of a cut in the federal funds rate is given by movement from point

Question

Quizplus · Accepted Answer

A cut in the federal funds rate typically lowers interest rates, encouraging borrowing and investment, which increases output. As output increases, firms hire more, leading to a decrease in the unemployment rate. This is represented by a movement from point a to point b in a typical aggregate demand and supply model.

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