(Figure: Monetary Policy I) Refer to Figure: Monetary Policy I

(Figure: Monetary Policy I) Refer to Figure: Monetary Policy I. If the economy is initially in equilibrium at E₁ and the central bank chooses to buy Treasury bills, _____ shift to _____ a(n) _____ gap. A) AD₁ will; AD₂, closing; recessionary B) AD₁ will; the left, increasing; recessionary C) SRAS₁ will immediately; left, closing; inflationary D) SRAS₂ will immediately; right, increasing; inflationary

(Figure: Monetary Policy I) Refer to Figure: Monetary Policy I. If the economy is initially in equilibrium at E₂ and the central bank chooses to sell Treasury bills: A) AD₂ will shift to the right, causing an inflationary gap. B) AD₂ will shift to AD₁, causing a recessionary gap. C) SRAS₁ will shift immediately to the left, closing an inflationary gap. D) SRAS₂ will shift immediately to the right, increasing an inflationary gap.