-The Economy Is at the Equilibrium Shown at Point a in the Above

question 36

Multiple Choice

-The economy is at the equilibrium shown at point a in the above figure. If the Reserve Bank

• A) lowers the cash rate, the economy moves to an equilibrium at point b.
• B) sells government securities, the economy moves to an equilibrium at point c.
• C) raises the cash rate, the economy moves to an equilibrium at point c.
• D) sells government securities, the economy moves to an equilibrium at point b.
• E) None of the above is correct because the economy will remain at point a in any case.

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Definitions:

High Demand

A situation in which the desire for a product or service significantly outweighs the supply available in the market.

Vertical Contracts

Agreements between companies at different levels in the supply chain, such as manufacturers and retailers, to specify conditions like pricing or product placement.

Costly Activities

Tasks or operations that require a significant amount of resources, including time, money, or energy.

New Product

A good, service, or concept that is recently developed, introduced to the market, or significantly improved.