Price level (GDP price index 2012-100) Pecencial AS 130 GDP 120 110 100 90 AD 165 19.0 193 200 20.3 210 Red GDP (en of 2012 dollars) The economy is at the equilibrium shown as point a in the above figure. To restore the economy to potential GDP, the Fed should in aggregate demand. interest rates, leading to a(n) decrease; decrease

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Price level (GDP price index, 2012-100)
Potential
130
AS
GDP
120
T10
100
90
AD
18.5
19.0
19.5
20.0
20.5
21.0
Real GDP (trilions of 2012 dollars)
Transcribed Image Text:Price level (GDP price index, 2012-100) Potential 130 AS GDP 120 T10 100 90 AD 18.5 19.0 19.5 20.0 20.5 21.0 Real GDP (trilions of 2012 dollars)
Price level (GDP price index 2012-100)
Pocential
AS
130
GDP
120
110
100
90
185
19.0
193
20.0
20.5 210
Real GDP (ons of 2012 dollars)
The economy is at the equilibrium shown as point a in the above figure. To restore the economy to potential GDP, the Fed should
in aggregate demand.
interest rates, leading to a(n)
O a. decrease; decrease
O b. decrease; increase
O c not change; increase
O d. increase; increase
O e. increase; decrease
Transcribed Image Text:Price level (GDP price index 2012-100) Pocential AS 130 GDP 120 110 100 90 185 19.0 193 20.0 20.5 210 Real GDP (ons of 2012 dollars) The economy is at the equilibrium shown as point a in the above figure. To restore the economy to potential GDP, the Fed should in aggregate demand. interest rates, leading to a(n) O a. decrease; decrease O b. decrease; increase O c not change; increase O d. increase; increase O e. increase; decrease
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