Suppose the economy is initially in long-run equilibrium. The Fed enacts a poKcy

Question

Suppose the economy is initially in long-run equilibrium. The Fed enacts a poKcy to decrease the discount rate. In the short-run this expansionary monetary policy will cause: A. A shift from AD_2 to AD_1 and a movement to point C, with a lower price level and the same output. B. A shift from SRAS_1 to SRAS_2 and a movement to point B, with a lower price level and higher output. C. A shift from SRAS_2 to SRAS_1 and a movement to point D, with a higher price level and lower output. D. A shift from AD_1 to AD_2 and a movement to point B, with a higher price level and higher output.

Explanation / Answer

D is Correct, As there is increase in investment which shifts the demand curve to the right causing supply to constant in short run with increased price levels and higher output

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.