Figure 12.3 -Refer to Figure 12.3. Suppose the Economy Is Initially at Economy

Multiple Choice

Figure 12.3

-Refer to Figure 12.3. Suppose the economy is initially at full employment with real GDP equal to potential GDP,and the Bank of Canada does not target interest rates,allowing the real interest rate to change like it did during the Great Depression.This would be reflected as a movement from ________ in the IS-MP model and ________ the Phillips curve.

A) point Y to point X; a movement up
B) point X to point Y; a movement down
C) point Z to point Y; a movement up
D) point Y to point Z; a movement down