Refer to the Following Figure to Answer the Next Questions

question 34

Multiple Choice

Refer to the following figure to answer the next questions.

-According to the figure, contractionary monetary policy will cause an economy that is initially at full-employment output to go from equilibrium ________ to equilibrium ________ in the short run.

• A) A; C
• B) A; B
• C) A; D
• D) C; B
• E) C; D

---

Definitions:

Aggregate Demand

The total call for goods and services within an economic system, set at a universal price level for a particular time slot.

Government Purchases

Expenditures by government entities on goods and services that contribute to a country's gross domestic product (GDP).

Nominal Interest Rate

The interest rate before adjusting for inflation, representing the surface rate at which interest is paid by a borrower for the use of money.

Exchange Rate

The price measured in one country’s currency of purchasing one unit of another country’s currency