-Refer to the above figure. Unexpected expansionary monetary policy has caused the aggregate demand curve to shift to AD2. In the short run
A) real GDP will be Y1, and the price level will be P1.
B) real GDP will be Y2, and the price level will be P2.
C) real GDP will be Y1, and the price level will be above P2.
D) real GDP will be between Y1 and Y2, and the price level will be between P1 and P2.

Question

-Refer to the above figure. Unexpected expansionary monetary policy has caused the aggregate demand curve to shift to AD2. In the short run
A) real GDP will be Y1, and the price level will be P1. 
B) real GDP will be Y2, and the price level will be P2. 
C) real GDP will be Y1, and the price level will be above P2. 
D) real GDP will be between Y1 and Y2, and the price level will be between P1 and P2.

Quizplus · Accepted Answer

An unexpected expansionary monetary policy leads to an increase in aggregate demand, shifting the aggregate demand curve to the right. This results in a new equilibrium where both the real GDP and the price level are higher, corresponding to point Y2 and P2, respectively.

-Refer to the Above Figure