Figure 15.1 Aggregate Supply and Aggregate Demand

-Refer to Figure 15.1. If the Fed enacts a monetary policy that shifts AD₀ to AD₁, it is successful in increasing ______, but the tradeoff is that the economy also experiences some ______.

Question

Figure 15.1 Aggregate Supply and Aggregate Demand

-Refer to Figure 15.1. If the Fed enacts a monetary policy that shifts AD₀ to AD₁, it is successful in increasing ______, but the tradeoff is that the economy also experiences some ______.

Quizplus · Accepted Answer

Shifting the Aggregate Demand curve to the right (from AD₀ to AD₁) indicates an expansionary monetary policy, which increases real output but also leads to higher inflation.