Question: Panel (a) Panel (b) SRAS Price level Price level SRAS P1.... . P2 P2 . ...... AD AD2 AD2 Yz Real GDP Yz Y, Real

Panel (a) Panel (b) SRAS Price level Price level SRAS P1.... . P2 P2 . ...... AD AD2 AD2 Yz Real GDP Yz Y, Real GDP (per year) (per year) Refer to Figure: The Money Supply and Aggregate Demand. Panel (b) illustrates what happens when the Federal Reserve decides to the money supply and interest rates. A. decrease; lower O B. increase; raise C. increase; lower D. decrease; raiseAggregate price level, P SRAS LRAS PA P3 P2 P1 AD V1 Yz Y3 Y4= potential Real GDP output Refer to Figure: Monetary Policy III. Expansionary economic policy will lead to an equilibrium GDP of: O A. Y1. O B. Y2. O C. Y3. O D. Y4

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