
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:Price Level
P:
P₁---7
SRAS,
AD₂
SRAS₂
ADI
Y Y
Goods and Services Market
Refer to Figure 14-5. AD₁ and SRAS, indicate an economy initially operating at full-employment output level, Y₁. The
long-run impact of the Fed unexpectedly shifting to a more restrictive monetary policy will be
O a decrease in aggregate demand to AD2 and a decrease in real output to Y₂2-
O a decrease in aggregate demand to AD₂ and an increase in short-run aggregate supply to SRAS2, causing the price level to fall to
P3 and real output to remain unchanged at Y₁-
no change; AD and SRAS will stay at AD₁ and SRAS₁.
O a decrease in the full-employment level of output to Y2-
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