Figure 17-7 Use This Graph to Answer the Questions Below

Multiple Choice

Figure 17-7
Use this graph to answer the questions below.

-Refer to figure 17-7. If the economy starts at 5% unemployment and 5% inflation then if the Federal Reserve pursues a contractionary monetary policy, in the short run the economy moves to

A) 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
B) 3% unemployment and 5% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.
C) 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 5% inflation.
D) 7% unemployment and 3% inflation. In the long run the economy moves to 5% unemployment and 3% inflation.