Use the following to answer questions :
Figure: AD-AS
-(Figure: AD-AS) Refer to the figure AD-AS. If our economy is at equilibrium and the Fed uses expansionary monetary policy, _____ will shift to _____ and the economy will move from _____. Then nominal wages will _____ and _____ will shift to _____. 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 and the Fed uses expansionary monetary policy, _____ will shift to _____ and the economy will move from _____. Then nominal wages will _____ and _____ will shift to _____. The economy will move from _____.

Quizplus · Accepted Answer

Expansionary monetary policy shifts the AD curve from AD1 to AD2, moving the economy from E1 to E2. As the economy heats up, nominal wages rise quickly, causing the SRAS to shift from SRAS1 to SRAS2, moving the economy from E2 to E3.

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