Refer to the Following Figure When Answering

Multiple Choice

Refer to the following figure when answering
Figure 14.2: IS-MP Curve
-Consider the IS-MP model in Figure 14.2 above. Starting from the long-run equilibrium, the burst of the housing bubble and the appropriate Fed response, WITHOUT a financial friction, can be shown as a movement from point ________ to point ________, and the economy is in ________.

A) c; e; its long-run equilibrium
B) d; b; its long-run equilibrium
C) b; a; an expansion
D) a; d; a recession
E) a; d; an expansion