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Figure: Monetary Policy I Use the following to answer questions: Figure: Monetary Policy I -(Figure: Monetary Policy I) Refer to Figure: Monetary Policy I. If the economy is initially in equilibrium at E<sub>2</sub> and the central bank chooses to buy Treasury bills, _____ shift to _____ a(n) _____ gap. A) AD<sub>2</sub> will; the right, causing; inflationary B) AD<sub>2</sub> will; AD<sub>1</sub>, causing; recessionary C) AD<sub>1</sub> will; AD<sub>2</sub>, closing; recessionary D) AD<sub>1</sub> will; the left, increasing; recessionary
-(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

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