Use the figure below to answer the following question(s).
Figure 10-16
-With the passage of time, which of the following will help direct this economy in Figure 10-16 toward its potential long-run rate of output?
A)lower interest rates that will stimulate AD and lower resource prices that will increase SRAS
B)higher interest rates that will reduce aggregate demand and higher resource prices that will reduce SRAS
C)lower interest rates and higher resource prices, both of which will stimulate aggregate demand
D)higher interest rates that will reduce SRAS and lower resource prices that will stimulate aggregate demand

Question

Use the figure below to answer the following question(s).
Figure 10-16 
-With the passage of time, which of the following will help direct this economy in Figure 10-16 toward its potential long-run rate of output?
A)lower interest rates that will stimulate AD and lower resource prices that will increase SRAS 
B)higher interest rates that will reduce aggregate demand and higher resource prices that will reduce SRAS 
C)lower interest rates and higher resource prices, both of which will stimulate aggregate demand 
D)higher interest rates that will reduce SRAS and lower resource prices that will stimulate aggregate demand

Quizplus · Accepted Answer

Lower interest rates stimulate aggregate demand (AD) by making borrowing cheaper, while lower resource prices increase short-run aggregate supply (SRAS) by reducing production costs, both of which help move the economy toward its potential long-run output.

Use the Figure Below to Answer the Following Question(s)