Figure 131 Alt Text for Figure 13

question 163

Multiple Choice

Figure 13.1 Alt text for Figure 13.1: In figure 13.1, a short-run Phillips curve.
Long description for Figure 13.1: The x-axis is labelled, unemployment rate percent, and the y-axis is labelled, inflation rate percent per year.A straight line labelled, Philips curve, begins at the top left corner and slopes down to the end of the x-axis.Point A is plotted half way along the line.Point B is plotted to the right of point A.Point C is plotted is to the left of point A.Point D is plotted above this line, in the left center of the quadrant.Point E is plotted below this line, directly beneath point A.
-Refer to Figure 13.1.Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above, and the unemployment rate at A is the natural rate.If the economy was to move to point C, which of the following must be true?

• A)The economy is producing a level of GDP equal to potential GDP.
• B)Aggregate demand must have decreased.
• C)Equilibrium GDP at point C must be above potential GDP.
• D)The Bank of Canada conducted contractionary policy to cause the move.
• E)The Bank of Canada sold Canada bonds to cause the move.

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Definitions:

Rate of Return

The profit or deficit experienced by an investment within a certain timeframe, depicted as a percentage of the investment's original price.

Required Return

The minimum expected return investors demand for an investment, considering its risk.