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 and long run?
A) point b in the short run and point c in the long run
B) point m in the short run and point c in the long run
C) point d in the short run and point h in the long run
D) point h in the short run and point d in the long run

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 and long run?
A) point b in the short run and point c in the long run 
B) point m in the short run and point c in the long run 
C) point d in the short run and point h in the long run 
D) point h in the short run and point d in the long run

Quizplus · Accepted Answer

An expansionary monetary policy will initially increase aggregate demand, moving the economy from point c to point d in the short run. In the long run, as prices adjust, the economy will move to point h, where the new long-run equilibrium is established.

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