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-(Figure: Monetary Policy and the AD-SRAS Model)Refer to Figure: Monetary Policy and the AD-SRAS Model.If the economy is in an inflationary gap at point h,it can move to point i as a result of:

Question

Use the following to answer questions: 
-(Figure: Monetary Policy and the AD-SRAS Model)Refer to Figure: Monetary Policy and the AD-SRAS Model.If the economy is in an inflationary gap at point h,it can move to point i as a result of:

Quizplus · Accepted Answer

To move from point h to point i, the economy needs to decrease aggregate demand to close the inflationary gap. One way to do this is to decrease the money supply, which would shift the AD curve to the left from AD1 to AD2, reducing output and prices to reach potential GDP at point i.

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