The aggregate demand curve is Y = 15 - 0.2π when the inflation rate falls from 6 percent to 5 percent.Then,output increases from 13.8 to 17.The response of monetary policy to the inflation decline has been ________.
A)autonomous tightening
B)automatic adjustment
C)autonomous easing
D)to increase autonomous spending
E)none of the above

Question

Quizplus · Accepted Answer

The decrease in inflation rate from 6 percent to 5 percent has led to an increase in output from 13.8 to 17. This suggests that there has been an autonomous easing of monetary policy, as evidenced by the downward shift in the aggregate demand curve from Y = 15 - 0.2π to a new curve that intersects the new output level of 17 at a lower inflation rate.

The Aggregate Demand Curve Is Y = 15 - 0