Use the following to answer questions: -(Figure: AD-AS) Refer to Figure: AD-AS. If our economy is at equilibrium with low-level inflation and the Fed uses expansionary monetary policy, the initial effect is that _____ will shift to _____ and the economy will move from _____. A) AD₁; AD₂; E₁to E₂ B) SRAS₁; SRAS₂; E₂to E₃ C) SRAS₂; SRAS₁; E₃to E₂ D) AD₂; AD₁; E₂to E₁

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With expansionary monetary policy, the aggregate demand (AD) curve will shift to the right (AD₁ to AD₂) and the economy will move from equilibrium point E1 to E2, with higher output (E₁ to E₂) and higher price level (P1 to P2).

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