the production possibilities curve (ppc) of the nation of mithrim is shown here. the economy is currently…

the production possibilities curve (ppc) of the nation of mithrim is shown here. the economy is currently operating at point b in the graph below. what combination of monetary and fiscal policy would be the most likely to return the economy to point c? choose 1 answer: a lower the reserve ratio; increase taxes b buy bonds; decrease taxes c sell bonds; decrease government spending d increase the discount rate; increase government spending e open market sales; increase taxes

the production possibilities curve (ppc) of the nation of mithrim is shown here. the economy is currently operating at point b in the graph below. what combination of monetary and fiscal policy would be the most likely to return the economy to point c? choose 1 answer: a lower the reserve ratio; increase taxes b buy bonds; decrease taxes c sell bonds; decrease government spending d increase the discount rate; increase government spending e open market sales; increase taxes

Answer

Brief Explanations:

Point B is inside the PPC, indicating under - utilization of resources. To move to point C (on the PPC), an expansionary policy mix is needed. Buying bonds is an expansionary monetary policy as it increases the money supply. Decreasing taxes is an expansionary fiscal policy as it increases disposable income and thus aggregate demand.

Answer:

B. Buy bonds; decrease taxes