Use the Figure Below to Answer the Following Question(s)

question 164

Multiple Choice

Use the figure below to answer the following question(s) .
Figure 14-5

-In Figure 14-5,AD₁ and SRAS₁ indicate an economy initially operating at full-employment output level,Y₁.The short-run impact of the Fed unexpectedly shifting to a more restrictive monetary policy will be

• A)a decrease in aggregate demand to AD₂ and a decrease in real output to Y₂.
• B)a decrease in aggregate demand to AD₂ but real output would remain at Y₁.
• C)a decrease in aggregate demand to AD₂ and an increase in short-run aggregate supply to SRAS₂,causing the price level to fall to P₃ and real output to remain unchanged at Y₁.
• D)no change;AD and SRAS will stay at AD₁ and SRAS₁.

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Definitions:

Enumerated Powers

Specific powers granted to Congress as outlined in the United States Constitution.

Commerce Clause

A provision in the U.S. Constitution (Article I, Section 8, Clause 3) granting Congress the power to regulate trade between states, with foreign nations, and among Indian tribes.

Congress

A bicameral body of government in the United States tasked with making laws, comprised of two houses: the Senate and the House of Representatives.

Trade Among States

The exchange of goods, services, or both between states within a country, subject to regulations and restrictions by the government.