Narrbegin Exhibit 16.1
-According to Exhibit 16.1, if the economy is currently operating at point C, the RBA is likely to:
A) decrease interest rates to stimulate aggregate demand and shift the AD curve to the right.
B) increase interest rates to suppress aggregate demand and shift the AD curve to the left.
C) increase interest rates to stimulate aggregate demand and shift the AD curve to the right.
D) decrease interest rates to discourage investments and shift the AD curve to the left.

Question

Narrbegin Exhibit 16.1  
-According to Exhibit 16.1, if the economy is currently operating at point C, the RBA is likely to:
A) decrease interest rates to stimulate aggregate demand and shift the AD curve to the right. 
B) increase interest rates to suppress aggregate demand and shift the AD curve to the left. 
C) increase interest rates to stimulate aggregate demand and shift the AD curve to the right. 
D) decrease interest rates to discourage investments and shift the AD curve to the left.

Quizplus · Accepted Answer

The RBA is likely to decrease interest rates to stimulate aggregate demand and shift the AD curve to the right because the economy is currently operating at point C, which is below the full employment level of output.