Figure 16-4
-Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which point in the short and long run?
A) point a in the short run and point b in the long run
B) point b in the short run and point a in the long run
C) point b in the short run and point c in the long run
D) point m in the short run and point h in the long run

Question

Figure 16-4 
-Refer to the Figure 16-4.If the economy is at point a and the Bank of Canada pursues an expansionary monetary policy,then the economy will move to which point in the short and long run?
A) point a in the short run and point b in the long run 
B) point b in the short run and point a in the long run 
C) point b in the short run and point c in the long run 
D) point m in the short run and point h in the long run

Quizplus · Accepted Answer

In the short run, an expansionary monetary policy will shift the aggregate demand curve to the right, moving the economy from point a to point b. In the long run, the aggregate supply curve will also shift to the right, moving the economy to point c.

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