IS Graph 2
-On the graph above,if the economy is at point A when the real interest rate falls,the economy's new situation might be indicated by point ________.
A)A
B)B
C)C
D)D
E)none of the above

Question

IS Graph 2 
-On the graph above,if the economy is at point A when the real interest rate falls,the economy's new situation might be indicated by point ________.
A)A 
B)B 
C)C 
D)D 
E)none of the above

Quizplus · Accepted Answer

According to the graph, when the real interest rate falls, the economy moves to a higher output level along the SRAS curve. This corresponds to point B on the graph, which is at a higher level of output than point A while holding the price level constant. Therefore, the best choice is B.