Econ 102 Final Exam Flas When the interest rate in Refer to

Econ 102 Final Exam Flas.. When the interest rate in... Refer to the graph. A Module 5 Exam Help Save & Exit 12 C,B, 00-1535 Unemployment Rate (%) Refer to the graph. What events would tend to temporarily move the economy Multiple Choice a tight monetary policy an increase in aggregate supply FS

Solution

Tight monetary policy is a course of action undertaken by the Federal Reserve to constrict spending in an economy that is seen to be growing too quickly or to curb inflation when it is rising too fast. But in graph, annual inflation rate increases from 4 to 8%. So, this option is not correct.

The increase in aggregate supply curve shifts to the right as productivity increases or the price of key inputs falls, making a combination of lower inflation, higher output, and lower unemployment possible. In graph,unemployment decreases but inflation rate increases. So, this option is also incorrect.

The goal of contractionary fiscal policy is to reduce inflation. Therefore the tools would be an decreasein government spending and/or an increase in taxes. This would shift the AD curve to the left decreasing inflation, but it may also cause someunemployment.But in graph, iflation rate increases. So, thos option is also incorrect.

An Expansionary Monetary Policy often referred to as \"easy monetary policy\" is used to increase economic growth, and generally decreases unemployment and increases inflation. In Graph ,unemployment decreases but inflation rate increases. So, this option is also correct.

So, the answer is Option 4 \'an easy money policy\'.