Figure: Monetary Policy Reference: Ref 16-1 (Figure: Monetary Policy)

Multiple Choice

Figure: Monetary Policy Reference: Ref 16-1 (Figure: Monetary Policy) Assume that the economy is initially at Point Y. If the Fed takes the appropriate action with monetary policy, but banks are slow to lend,

A) the Fed action would be magnified and the economy would move to Point X.
B) the Fed action would be nullified and the economy would remain at Point Y.
C) the Fed action would be partially effective and the economy would move to Point Z.
D) the Solow growth curve would shift to the left.