Figure 12.1 -Refer to Figure 12.1...Suppose the Economy Is Initially at Full

Multiple Choice

Figure 12.1

-Refer to Figure 12.1...Suppose the economy is initially at full employment with real GDP equal to potential GDP,and the expected inflation rate equal to the actual inflation rate.If the economy then experiences a negative demand shock,and the central bank responds to the results of the demand shock with an appropriate monetary policy,the central bank response will result in a

A) shift from IS₁ to IS₂.
B) shift from MP₁ to MP₂.
C) shift from IS₂ to IS₁.
D) shift from MP₂ to MP₁.