Refer to the following figure when answering
Figure 12.2: IS-MP Curve
-Consider Figure 12.2. If the Fed lowers interest rates and there are no aggregate demand shocks, the economy moves from:
A) point d to a
B) point c to a
C) point a to b
D) point d to c
E) None of these answers are correct.

Question

Refer to the following figure when answering  
Figure 12.2: IS-MP Curve 
-Consider Figure 12.2. If the Fed lowers interest rates and there are no aggregate demand shocks, the economy moves from:
A) point d to a 
B) point c to a 
C) point a to b 
D) point d to c 
E) None of these answers are correct.

Quizplus · Accepted Answer

Lowering interest rates typically stimulates aggregate demand, moving the economy from a point of lower output and higher unemployment (point d) to a point of higher output and lower unemployment (point a) on the aggregate demand curve.

Refer to the Following Figure When Answering