Figure 11.2 -Refer to Figure 11.2...Assume the Economy Is in Equilibrium at Is

Multiple Choice

Figure 11.2

-Refer to Figure 11.2...Assume the economy is in equilibrium at Ȳ₁,where real GDP equals potential GDP.The economy experiences a negative demand shock,and the Bank of Canada responds by decreasing real interest rates to bring real GDP and inflation back to their original levels.Other things equal,the Bank of Canada's response to the negative demand shock is best represented by a movement from

A) point B to point D.
B) point C to point D.
C) point B to point A.
D) point C to point A.