Figure 11.2 -Refer to Figure 11.2...Assume the Economy Is in Equilibrium at Is

question 70

Multiple Choice

Figure 11.2

-Refer to Figure 11.2...Assume the economy is in equilibrium at Ȳ₁,where real GDP equals potential GDP.The economy experiences a positive demand shock,and the Bank of Canada responds by increasing real interest rates to bring real GDP and inflation back to their original levels.Other things equal,the positive demand shock is best represented by am initial movement from

• A) point A to point B.
• B) point A to point C.
• C) point D to point B.
• D) point D to point C.

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Definitions:

Substitute Product

A good or service that can be used in place of another to satisfy similar needs or desires.

Complements

Products or services that are used together, where the consumption or use of one increases the demand for the other.

Substitutes

Goods or services that can be used in place of each other, satisfying the same needs or desires.

Complements

Products or services that are often used together, such that demand for one increases the demand for the other.