Refer to Figure 17.5 for the following question.
Figure 17.5
-Refer to Figure 17.5.In this figure,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

Question

Refer to Figure 17.5 for the following question.
Figure 17.5 
-Refer to Figure 17.5.In this figure,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Reserve Bank of Australia use to move the economy to point C?

Quizplus · Accepted Answer

Selling financial securities would reduce the money supply in the economy, which would increase interest rates and decrease aggregate demand, leading to a decrease in output and a decrease in the price level. This would move the economy to point C, which represents a lower level of inflation and a higher level of unemployment. The other policies (decreasing income taxes and increasing government spending) would increase aggregate demand and move the economy away from point C. Buying financial securities would increase the money supply, leading to lower interest rates and higher aggregate demand, which would also move the economy away from point C.

Refer to Figure 17.5 for the Following Question