Figure 16-6 -Refer to Figure 16-6. Suppose the Economy Was Operating at Was

Multiple Choice

Figure 16-6
-Refer to Figure 16-6. Suppose the economy was operating at point e in period 1. Expansionary fiscal and monetary policies adopted in period 1 resulted in a movement to point g in period 3. When workers and firms adjust their expectations in a higher price level and act on these expectations, the economy moves from a

A) expansionary phase to a recovery phase.
B) Phillips phase to a stagflation phase.
C) Phillips phase to a recovery phase.
D) stagflation phase to a recovery phase.