-In the above figure, assume the aggregate demand of the economy is AD₂ and the Fed actions move aggregate demand to AD₁. In this situation, the Fed has practiced

Question

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The Fed moving aggregate demand from AD2 to AD1 indicates a decrease in aggregate demand, which is achieved through contractionary monetary policy. This involves actions like raising interest rates or selling government securities to reduce the money supply.

-In the Above Figure, Assume the Aggregate Demand of the Economy