Figure 17-7
Use this graph to answer the questions below.

-Refer to figure 17-7. Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%. Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Question

Figure 17-7
Use this graph to answer the questions below.
 
-Refer to figure 17-7. Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%. Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

Quizplus · Accepted Answer

In the short run, an expansionary monetary policy can reduce unemployment and increase inflation, moving the economy to a point with lower unemployment and higher inflation, such as 3% unemployment and 5% inflation.

Figure 17-7 Use This Graph to Answer the Questions Below