Quiz: Quiz 5 Time Remaining: 00:22:33 Submit Quiz This Question: 1 pt 11 of 15 (
ID: 1105082 • Letter: Q
Question
Quiz: Quiz 5 Time Remaining: 00:22:33 Submit Quiz This Question: 1 pt 11 of 15 (10 complete) This Quiz: 15 pts possible Suppose the economy is initially in long-run equilibrium. The Fed enacts a policy to decrease the required reserve ratio. In the short-run, this expansionary monetary policy will cause Price Level SRAS2 12 LRAS 118 O A. A shift from SRAS2 to SRASI and a movement to point D, with a higher B. A shift from AD1 to AD2 and a movement to point B, with a higher price ° C. A shift from SRAS! to SRAS2 and a movement to point B, with a lower price level and lower output. level and higher output. price level and higher output. SRAS1 AD2 10 D. A shift from AD2 to AD1 and a movement to point C, with a lower price level and the same output. AD 10 12 14 16 Real GDP (trillions of 2000 dollars) Click to select your answer.Explanation / Answer
Answer
Option B
The expansionary policy is increasing money supply which stimulates the demand in the economy and increases money with public which leads to increase in price and inflation in short run as well as increase in the real output
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