Figure 26-7
-Refer to Figure 26-7.Suppose the Fed lowers its target for the federal funds rate.Using the static AD-AS model in the figure above,this situation would be depicted as a movement from
A)A to B.
B)B to A.
C)C to B.
D)E to A.
E)C to D.

Question

Figure 26-7 
-Refer to Figure 26-7.Suppose the Fed lowers its target for the federal funds rate.Using the static AD-AS model in the figure above,this situation would be depicted as a movement from
A)A to B. 
B)B to A. 
C)C to B. 
D)E to A. 
E)C to D.

Quizplus · Accepted Answer

A decrease in the federal funds rate target would lead to a decrease in interest rates, causing an increase in investment and consumption. This results in an increase in aggregate demand, shifting the AD curve from A to B.

Figure 26-7 -Refer to Figure 26-7.Suppose the Fed Lowers Its Target for Its