-Refer to the above graphs,in which the numbers in parentheses after the AD₁,AD₂,and AD₃ labels indicate the level of investment spending associated with each curve,respectively.All numbers are in billions of dollars.The interest rate and the level of investment spending in the economy are at point B on the investment demand curve.To achieve the goal of a non-inflationary full-employment output Q_f in the economy,the monetary authorities should: A) decrease the interest rate from 10 to 8 percent. B) decrease the interest rate from 8 to 6 percent. C) decrease the interest rate from 6 to 4 percent. D) increase investment spending from $30 to $60 billion.

Question

Quizplus · Accepted Answer

To achieve the goal of non-inflationary full-employment output (Q_f) in the economy, the AD curve needs to shift rightward, which can be achieved by increasing aggregate demand. As the economy is at point B on the investment demand curve, a decrease in the interest rate will increase investment spending and shift the AD curve rightward, thus achieving the goal of non-inflationary full-employment output. From the graph, we can see that a decrease in the interest rate from 8 to 6 percent will shift the AD curve from AD₃ to AD₂, bringing the economy closer to the goal of non-inflationary full-employment output without causing inflation. Therefore, the best choice is B, decrease the interest rate from 8 to 6 percent.

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