(Figure: Shifts in SRAS and AD) If the Economy Is

question 234

Multiple Choice

(Figure: Shifts in SRAS and AD) If the economy is at short-run equilibrium point b because of a negative supply shock, the Federal Reserve could enact an expansionary monetary policy, thus shifting the new equilibrium to point _____. As a result of this, the price level would _____ and real output would _____.

• A) a; decrease; further decrease
• B) c; further increase; increase
• C) d; decrease; increase
• D) No monetary policy would have any effect; the equilibrium will remain at point b.

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