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Figure: Monetary Policy and the AD-SRAS Model
-(Figure: Monetary Policy and the AD-SRAS Model) Look at the figure Monetary Policy and the AD-SRAS Model. If the economy is in a recessionary gap at point f, it could move to point g as a result of:

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Use the following to answer questions :
Figure: Monetary Policy and the AD-SRAS Model 
-(Figure: Monetary Policy and the AD-SRAS Model) Look at the figure Monetary Policy and the AD-SRAS Model. If the economy is in a recessionary gap at point f, it could move to point g as a result of:

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Purchases of government securities in the open market would increase the money supply and shift the aggregate demand (AD) curve to the right, causing the economy to move from point f to point g, which is closer to the full employment level of output. A decrease in government spending, an increase in the discount rate, or a decrease in the money supply would all decrease aggregate demand and move the economy further away from full employment.

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