Refer to the Diagram Given Below

question 42

Multiple Choice

Refer to the diagram given below.Suppose an economy is initially at point B₁. If workers fully anticipate price level increases and the government uses expansionary policies to bring the unemployment rate below 6 percent, the economy will:

• A)move from B₁ to C₁ at which macroeconomic policies will cease to be effective.
• B)remain at B₁.
• C)follow the path indicated by B₁, B₂, B₃, and B₄.
• D)directly move from B₄ to C₁.