Figure 11-6 -Refer to Figure 11-6.If Rational Expectations Exist and the Economy

Multiple Choice

Figure 11-6

-Refer to Figure 11-6.If rational expectations exist and the economy is initially operating at
"d".If the Fed undertakes contractionary monetary policy the economy will

A) spend some time at c with a recessionary gap.
B) spend no time at c and move directly to b.
C) bypass c and move to a, because the short-run aggregate supply curve shifts to the left.
D) bypass c and move to a, because the short-run aggregate supply curve shifts immediately to the right and the economy moves down the long-run aggregate supply curve.