Author Question: Refer to Figure 17-1. Suppose that the economy is currently at pointAon the short-run ... (Read 91 times)

nelaaney · **on:** Mar 16, 2019

Question 1

Figure 17-1

Refer to Figure 17-1. Suppose that the economy is currently at point A, and the unemployment rate at A is the natural rate. What policy would the Federal Reserve pursue if it wanted the economy to move to point B in the long run?

◦ Buy treasury bills.
◦ Sell treasury bills.
◦ Raise the discount rate.
◦ Decrease the money supply.
◦ No policy will move the economy to point B in the long run.

Question 2

Figure 17-1

Refer to Figure 17-1. Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above, and the unemployment rate at A is the natural rate. If the economy was to move to point C, which of the following must be true?

◦ The economy is producing a level of GDP equal to potential GDP.
◦ Aggregate demand must have decreased.
◦ Equilibrium GDP at point C must be above potential GDP.
◦ The Fed conducted contractionary policy to cause the move.
◦ The Fed sold treasury bills to cause the move.

sarah_brady415 · **Reply #1 on:** Mar 16, 2019

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