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

Question 221
Multiple Choice

(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

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Q 222
(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.
Q 223
(Figure: Monetary Policy II) Refer to Figure: Monetary Policy II. To eliminate the inflationary gap from the short-run equilibrium at Y2, monetary policy should be: A) expansionary. B) contractionary. C) neutral. D) balanced.
Q 224
(Figure: Monetary Policy II) Refer to Figure: Monetary Policy II. If the short-run equilibrium is at Y2, appropriate central bank policy is: A) contractionary. B) expansionary. C) neutral. D) balanced.
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