Refer to Figure 12.4 for the following question.
Figure 12.4

-Refer to Figure 12.4. In this figure, if the economy in Year 1 is at point A and expected in Year 2 to be at point B, then the appropriate monetary policy by the Reserve Bank of Australia would be to:

Question

Refer to Figure 12.4 for the following question.
Figure 12.4
 
-Refer to Figure 12.4. In this figure, if the economy in Year 1 is at point A and expected in Year 2 to be at point B, then the appropriate monetary policy by the Reserve Bank of Australia would be to:

Quizplus · Accepted Answer

If the economy is expected to move from point A to point B, it indicates an increase in aggregate demand and potential inflationary pressures. To counter inflation, the Reserve Bank of Australia should raise interest rates, which would reduce borrowing and spending, resulting in a decrease in aggregate demand and help to stabilize the economy. Hence, the appropriate monetary policy in this situation would be to raise interest rates.

Refer to Figure 12.4 for the Following Question