Suppose the economy is initially in long-run equilibrium. The Fed decides to increase the required reserve ratio. In the short-run, this contractionary monetary policy will cause: OA. A shift from SRAS, to SRAS, and a movement to point A, with a higher price level and the same output. OB. A shift from AD₂ to AD, and a movement to point D, with a lower price level and lower output. OC. A shift from AD, to AD₂ and a movement to point B, with a higher price level and higher output. OD. A shift from SRAS₂ to SRAS, and a movement to point B, with a lower price level and higher output. CIE 22- 20- 18- 16- 14- 12- 10- 08- 06- 04- 02- 00- 98- 96- 94- 92- 90- Price Level 0 LRAS G B 4 6 10 12 8 Real GDP (trillions of 2000 dollars) SRAS2 SRAS₁ AD2 AD1 14 16
Suppose the economy is initially in long-run equilibrium. The Fed decides to increase the required reserve ratio. In the short-run, this contractionary monetary policy will cause: OA. A shift from SRAS, to SRAS, and a movement to point A, with a higher price level and the same output. OB. A shift from AD₂ to AD, and a movement to point D, with a lower price level and lower output. OC. A shift from AD, to AD₂ and a movement to point B, with a higher price level and higher output. OD. A shift from SRAS₂ to SRAS, and a movement to point B, with a lower price level and higher output. CIE 22- 20- 18- 16- 14- 12- 10- 08- 06- 04- 02- 00- 98- 96- 94- 92- 90- Price Level 0 LRAS G B 4 6 10 12 8 Real GDP (trillions of 2000 dollars) SRAS2 SRAS₁ AD2 AD1 14 16
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose the economy is initially in long-run equilibrium.
The Fed decides to increase the required reserve ratio. In
the short-run, this contractionary monetary policy
will cause:
O A. A shift from SRAS, to SRAS₂ and a movement to
point A, with a higher price level and the same
output.
OB. A shift from AD₂ to AD, and a movement to
point D, with a lower price level and lower output.
OC. A shift from AD, to AD₂ and a movement to
point B, with a higher price level and higher
output.
OD. A shift from SRAS₂ to SRAS, and a movement to
point B, with a lower price level and higher output.
22
20-
18-
16-
14-
12-
10-
08-
06-
04-
02-
00-
98-
96-
94-
92-
Price Level
90+
0
LRAS
B
2
6
8 10 12
Real GDP (trillions of 2000 dollars)
SRAS2
SRAS,
AD2
AD1
14
16
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