Refer to the following figure to answer the following questions.
-According to the figure,contractionary monetary policy starting at full-employment equilibrium will go from point ________ to point ________ in the short run and then to point ________ in the long run.
A) A; D; A
B) C; B; A
C) A; D; C
D) C; D; C
E) C; D; A

Question

Refer to the following figure to answer the following questions. 
-According to the figure,contractionary monetary policy starting at full-employment equilibrium will go from point ________ to point ________ in the short run and then to point ________ in the long run.
A) A; D; A 
B) C; B; A 
C) A; D; C 
D) C; D; C 
E) C; D; A

Quizplus · Accepted Answer

According to the figure, if contractionary monetary policy is implemented at full-employment equilibrium (point D), it will shift the aggregate demand curve to the left. In the short run, this will result in a decrease in output and a decrease in price level, moving the economy from point C to point D. However, in the long run, prices adjust and the economy returns to potential output, represented by the long-run aggregate supply curve at point A. Therefore, the economy will end up at point A in the long run.

Refer to the Following Figure to Answer the Following Questions