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

Question 219
Multiple Choice

(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 buy Treasury bills, _____ shift to _____ a(n) _____ gap. A) AD2 will; the right, causing; inflationary B) AD2 will; AD1, causing; recessionary C) AD1 will; AD2, closing; recessionary D) AD1 will; the left, increasing; recessionary