1. The graph shows the effects of an expansionary monetary policy, which, over time, results in shifts of both the aggregate demand curve (AD1 to AD2) and the short-run aggregate supply curve (SRAS1 to SRAS2). If the dot indicates the economy's initial equilibrium state, place a second dot to show the economy's new equilibrium in the short run, given that the monetary policy was unexpected.

Question

Price level ($)
200
187.5
175
162.5
150
137.5
125
112.5
100
87.5
75
62.5
50
37.5
25
12.5
0
0
125
112.5
100
2
A
6
8
10
12
I
I

Price level ($) 200 187.5 175 162.5 150 137.5 125 112.5 100 87.5 75 62.5 50 37.5 25 12.5 0 0 125 112.5 100 2 A 6 8 10 12 I I I I 13 LRAS Equilibrium 16 I 19 14 16 18 20 22 24 26 SRAS2 SRAS1 AD2 AD1 30 32 Real GDP ($ trillions)

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Expert Answer to - 1. The graph shows the effects of an expansionary monetary policy, which, over time, results in shif

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Solution for - 1. The graph shows the effects of an expansionary monetary policy, which, over time, results in shif

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