Refer to the Graphs Above, in Which the Numbers in Parentheses

question 42

Multiple Choice

Refer to the graphs above, in which the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the level of investment spending associated with each curve. All figures are in billions. The economy is at point X on the investment demand curve. Given these conditions, what policy should the Fed pursue to achieve a noninflationary full-employment level of real GDP?

• A) Decrease aggregate demand from AD₁ to AD₂
• B) Increase the money supply from $75 to $150 billion
• C) Increase interest rates from 4 to 8 percent
• D) Make no change in monetary policy

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