For the following questions refer to Figure 14.3 below.
-Consider Figure 14.3 above.If the economy begins in its long-run equilibrium and there is a decrease in the economy's risk premium,the economy would move from point __________ to __________.
A)c;d
B)a;d
C)b;c
D)a;b
E)b;a

Question

For the following questions refer to Figure 14.3 below. 
-Consider Figure 14.3 above.If the economy begins in its long-run equilibrium and there is a decrease in the economy's risk premium,the economy would move from point __________ to __________.
A)c;d 
B)a;d 
C)b;c 
D)a;b 
E)b;a

Quizplus · Accepted Answer

A decrease in the economy's risk premium would likely lead to increased investment and spending, shifting the aggregate demand curve to the right. This would move the economy from point a (long-run equilibrium) to point b (short-run equilibrium with higher output and price level).

For the Following Questions Refer to Figure 14