Figure 12.4 Scenario: the Above Figures Represent the Economy of Mondolvia, Where

question 20

Multiple Choice

Figure 12.4

Scenario: The above figures represent the economy of Mondolvia, where points A, B, C, and D in the first figure reflect the corresponding points in the second figure. The economy of Mondolvia is initially at equilibrium with real GDP equal to potential GDP. In April 2012, Mondolvia reached the peak of a rapid housing bubble that dramatically increased consumer wealth. The central bank of Mondolvia recognized this housing bubble peak existed in June, 2012 and implemented corrective policy in August 2012. The corrective policy actually changed output in the economy 12 months after it was implemented. In the meantime, the housing bubble burst in December 2012, returning the economy back to its initial, pre-bubble equilibrium level.
-Refer to Figure 12.4.The implementation of corrective policy by the central bank is designed to move the economy from

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

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Definitions:

Minimize Occurrence

Efforts or measures taken to reduce the frequency or likelihood of an event or condition happening.

Collaboration

The action of working with someone to produce or create something.

Win-Win Solution

An outcome of a negotiation where all parties feel they have achieved a satisfactory resolution.

Miscommunication

A failure to convey or understand information accurately, leading to misunderstandings or confusion.