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

question 21

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.If the Federal Reserve pursues an expansionary 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 3% unemployment and 5% 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.

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Definitions:

Annual Growth Rate

The yearly rate at which an investment or part of the economy grows.

Town's Population

The number of people living in a particular town.

Grow

To increase in size, amount, or value over a period of time.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, typically used as an indicator of inflation.