A country’s central bank increases interest rates in order to bring down the general price level. At what point is this policy likely to have the greatest effect?
- Aposition of the economy on its production possibility curve (PPC) diagram: below the PPC; responsiveness of aggregate demand to interest rate changes: high
- Bposition of the economy on its production possibility curve (PPC) diagram: below the PPC; responsiveness of aggregate demand to interest rate changes: low
- Cposition of the economy on its production possibility curve (PPC) diagram: on the PPC; responsiveness of aggregate demand to interest rate changes: high
- Dposition of the economy on its production possibility curve (PPC) diagram: on the PPC; responsiveness of aggregate demand to interest rate changes: low