Use the figure below to answer the following question(s). Figure 14-1
In Figure 14-1, an unanticipated shift to a more expansionary monetary policy will shift
A) AD to the right and temporarily increase real GDP.
B) AD to the left and temporarily reduce real GDP.
C) AD to the right and SRAS to the left and lead to higher prices (inflation).
D) both AD and SRAS to the right and lead to an increase in real GDP.

Question

Use the figure below to answer the following question(s). Figure 14-1
 In Figure 14-1, an unanticipated shift to a more expansionary monetary policy will shift
A) AD to the right and temporarily increase real GDP. 
B) AD to the left and temporarily reduce real GDP. 
C) AD to the right and SRAS to the left and lead to higher prices (inflation). 
D) both AD and SRAS to the right and lead to an increase in real GDP.

Quizplus · Accepted Answer

An unanticipated shift to a more expansionary monetary policy will increase the money supply, which will lower interest rates and increase consumer and business spending, ultimately shifting the aggregate demand (AD) curve to the right and increasing real GDP temporarily.

Use the Figure Below to Answer the Following Question(s)