Use the following to answer questions: -(Figure: AD-AS) Refer to Figure: AD-AS. If our economy is at equilibrium and the Fed uses expansionary monetary policy, _____ will shift to _____ and the economy will move from _____. Then nominal wages will _____ and _____ will shift to _____. The economy will move from _____. A) AD₂; AD₁; E₂to E₁; rise; SRAS₁; SRAS₂; E₂to E₃ B) SRAS₁ ; SRAS₂; E₂to E₃; stay the same; AD₂; AD₁; E₂to E₁ C) SRAS₂; SRAS₁; E₃to E₂; stay the same; AD₂; AD₁; E₂to E₁ D) AD₁; AD₂; E₁to E₂; rise; SRAS₁; SRAS₂; from E₂to E₃

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Expansionary monetary policy shifts the aggregate demand curve to the right, leading to an increase in nominal wages and a subsequent rightward shift of the short-run aggregate supply curve.

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