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, with a large, positive financial friction, can be shown as a movement from point ________ to point ________, and the economy is in ________.

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