Figure 16-4

-Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which of the following points in the short and long run?
A)point a in the short run and point b in the long run
B)point b in the short run and point a in the long run
C)point b in the short run and point c in the long run
D)point m in the short run and point h in the long run

Question

Figure 16-4
 
-Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which of the following points in the short and long run?
A)point a in the short run and point b in the long run 
B)point b in the short run and point a in the long run 
C)point b in the short run and point c in the long run 
D)point m in the short run and point h in the long run

Quizplus · Accepted Answer

In the short run, expansionary monetary policy shifts the aggregate demand curve, moving the economy from point a to point b. In the long run, the economy adjusts to the new equilibrium at point c as prices and wages become flexible.

Figure 16-4 -Refer to the Figure 16-4.If the Economy Is at Point