-In the Above Figure, If the Economy Is Initially at an Equilibrium

Multiple Choice

-In the above figure, if the economy is initially at an equilibrium output at point A and the interest rate is r1, then an open market purchase of bonds by the Fed will

A) cause interest rates to increase and output to decline.
B) cause interest rates to decline to r2, investment to increase to I2, and the AD curve to shift upward to the right.
C) cause interest rates to decline to r2, investment to decline, and aggregate demand to shift inward to the left.
D) not have any impact on short- or long-run equilibrium real Gross Domestic Product (GDP) .