-Refer to the above figure. Unexpected expansionary monetary policy has caused the aggregate demand curve to shift to AD2. In the short run

Question

Quizplus · Accepted Answer

Unexpected expansionary monetary policy leads to an increase in aggregate demand, shifting the AD curve to the right (from AD1 to AD2). In the short run, this results in higher output and employment, thus reducing the unemployment rate compared to the rate before the policy was implemented.

-Refer to the Above Figure