Refer to Figure 12.5. If exchange rates are floating, the Fed decreasing its target inflation rate would best be represented by a movement from ________ in panel (a) and a corresponding movement from ________ in panel (b).
A) point A to point B; point X to point Y
B) point C to point A; point X to point Y
C) point D to point C; point Y to point X
D) point B to point D; point Y to point X
Question 2
A higher desired level of capital and investment will result from ________.
A) a decrease in productivity
B) a fall in expected future output
C) a depressed economy
D) a booming economy
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