Figure 35-8 Use This Graph to Answer the Questions Below

question 29

Multiple Choice

Figure 35-8
Use this graph to answer the questions below.
-Refer to figure 35-8.Suppose the economy starts at 5% unemployment and 3% inflation and expected inflation remains at 3%.Which one of the following points could the economy move to in the short run if the Federal Reserve pursues a more expansionary monetary policy?

• A)7% unemployment and 1% inflation
• B)7% unemployment and 3% inflation
• C)3% unemployment and 5% inflation
• D)3% unemployment and 7% inflation

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Definitions:

Consumption

The act of consuming goods and services either by individuals or society as a whole, central to economic analysis of demand and spending.

Income

The money received, usually on a regular basis, for work or through investments.

Interest Rate

The segment of a loan levied as interest upon the borrower, customarily indicated as an annual proportion of the loan yet to be repaid.

Utility Function

A representation in economics that expresses the preference ordering of various utility levels or consumption bundles by individuals or firms.