Figure 22-7 Use This Graph to Answer the Questions Below

question 101

Multiple Choice

Figure 22-7
Use this graph to answer the questions below.
-Refer to figure 22-7. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

• A)3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
• B)3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.
• C)7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
• D)7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.

---

Definitions:

Paying Suppliers

The process of settling financial transactions with suppliers by transferring payment for goods or services received.

Inventory Period

The duration of time it takes for a company to sell its inventory and convert it into sales, often measured in days or months.

Slow-selling Merchandise

Items in inventory that move or sell at a slower pace than anticipated, often leading to excess stock and markdowns.

Cash Cycle

Refers to the amount of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.