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Figure: AD-AS
-(Figure: AD-AS) Refer to the 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 _____.

Question

Use the following to answer questions :
Figure: AD-AS 
-(Figure: AD-AS) Refer to the 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 _____.

Quizplus · Accepted Answer

According to the figure, expansionary monetary policy will cause the AD curve to shift to the right from AD₁ to AD₂, resulting in an increase in output from E₁ to E₂.

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