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

Question

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

Quizplus · Accepted Answer

An expansionary monetary policy involves increasing the money supply and lowering interest rates, which stimulates borrowing and spending. This will shift the aggregate demand curve to the right, leading to an increase in output and inflation. Point d is the only point to the right of point c, therefore it is the only option where the economy can move towards with an expansionary monetary policy. Points b and h are not reachable as they are beyond the full employment level of output, and point c is already the initial starting point.

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