Figure 28-1 -Refer to Figure 28-1. Suppose That the Economy Is Currently

Multiple Choice

Figure 28-1
-Refer to Figure 28-1. Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above, and the unemployment rate at A is the natural rate. If the economy was to move to point C, which of the following must be true?

A) The economy is producing a level of GDP equal to potential GDP.
B) Aggregate demand must have decreased.
C) Equilibrium GDP at point C must be above potential GDP.
D) The Fed conducted contractionary policy to cause the move.
E) The Fed sold treasury bills to cause the move.