The equilibrium output level in the country of Plutonia is $44 billion, while its potential output is $74 billion. Suppose the central bank of the country implements an expansionary monetary policy. Which of the following is likely to occur?
a. An increase in interest rates will stimulate investment, shifting the aggregate demand curve to the right.
b. A reduction in interest rates will stimulate investment, shifting the aggregate demand curve to the right.
c. A reduction in interest rates will lower investment, shifting the aggregate demand curve to the left.
d. An increase in interest rates will lower investment, shifting the aggregate demand curve to the left.
b
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In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. In the current market for peanut butter, the price rises and the quantity increases
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