Figure 13.1 Alt text for Figure 13.1: In figure 13.1, a short-run Phillips curve.
Long description for Figure 13.1: The x-axis is labelled, unemployment rate percent, and the y-axis is labelled, inflation rate percent per year.A straight line labelled, Philips curve, begins at the top left corner and slopes down to the end of the x-axis.Point A is plotted half way along line Philips curve.Point B is plotted to the right of point A and point C is plotted is to the left of point A.Point D is plotted above this line, in the left center of the quadrant.Point E is plotted below this line, directly below point A.
-Refer to Figure 13.1. Suppose that the economy is currently at point A.If the Bank of Canada engaged in expansionary monetary policy, where would the economy end up in the short run?

Question

Figure 13.1  Alt text for Figure 13.1: In figure 13.1, a short-run Phillips curve.
Long description for Figure 13.1: The x-axis is labelled, unemployment rate percent, and the y-axis is labelled, inflation rate percent per year.A straight line labelled, Philips curve, begins at the top left corner and slopes down to the end of the x-axis.Point A is plotted half way along line Philips curve.Point B is plotted to the right of point A and point C is plotted is to the left of point A.Point D is plotted above this line, in the left center of the quadrant.Point E is plotted below this line, directly below point A.
-Refer to Figure 13.1. Suppose that the economy is currently at point A.If the Bank of Canada engaged in expansionary monetary policy, where would the economy end up in the short run?

Quizplus · Accepted Answer

Expansionary monetary policy typically lowers interest rates, which increases aggregate demand, leading to higher output and price levels. In the short run, this would move the economy from point A to point C, where output is higher.

Figure 131 Alt Text for Figure 13