Refer to the Diagram $\mathrm { PC } _ { 1 } .$

question 87

Multiple Choice

Refer to the diagram. Point b would not be permanent because the

• A) economy would move from b to a on PC \(\mathrm { PC } _ { 1 } .\)
• B) short-run Phillips Curve would shift from PC \(\mathrm { PC } _ { 1 } \text { to } \mathrm { PC } _ { 2 }\) and unemployment would increase to The natural rate at c.
• C) economy would immediately move from b to c to d.
• D) economy would move from b directly to d.

---

Definitions:

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.

Reserve Ratio

The fraction of depositors' balances that banks must have on hand as cash, determined by the central bank to control money supply.

Checking Deposits

Funds kept in a checking account at a financial institution, allowing for frequent withdrawals and deposits.

Deposit Expansion Multiplier

A ratio that determines the maximum amount by which the money supply can increase through the banking system's process of lending out deposits.