Figure 16-4
-Refer to 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 of the following points in the short run?
A)point b
B)point c
C)point d
D)point h

Question

Figure 16-4 
-Refer to 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 of the following points in the short run?
A)point b 
B)point c 
C)point d 
D)point h

Quizplus · Accepted Answer

An expansionary monetary policy will increase aggregate demand in the short run, causing the economy to move to a higher level of output and price level. This means that the economy will move up and to the right from point c, towards point d. Therefore, the correct choice is C.

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