Figure 35-4

-Refer to figure 35-4.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Question

Figure 35-4
 
-Refer to figure 35-4.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Quizplus · Accepted Answer

In the short run, an expansionary monetary policy can lower unemployment and increase inflation, moving the economy to a point with lower unemployment and higher inflation, such as 3% unemployment and 5% inflation.

Figure 35-4 -Refer to Figure 35-4.Suppose the Economy Starts at 5% Unemployment