Refer to the figure below to answer the following questions.
Figure 7.2.2
-In Figure 7.2.2, a decrease in the real interest rate will result in a movement from point E to
A)point F.
B)point G.
C)point H.
D)point I.
E)either point G or point F.

Question

Refer to the figure below to answer the following questions.
  Figure 7.2.2
-In Figure 7.2.2, a decrease in the real interest rate will result in a movement from point E to
A)point F. 
B)point G. 
C)point H. 
D)point I. 
E)either point G or point F.

Quizplus · Accepted Answer

A decrease in the real interest rate would result in an increase in investment, which leads to an increase in aggregate demand and a shift from AD1 to AD2. As a result, the economy moves from point E to point G on the Phillips Curve. Therefore, the best choice is B.

Refer to the Figure Below to Answer the Following Questions