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Question 58

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Use the following to answer questions :
Figure: Monetary Policy I Use the following to answer questions : Figure: Monetary Policy I -(Figure: Monetary Policy I) Look at the figure Monetary Policy I. If the economy is initially in equilibrium at E<sub>1</sub> and the central bank chooses to sell Treasury bills, _____ shift to the _____ a(n) _____ gap. A) AD<sub>2</sub> will; right, causing; inflationary B) AD<sub>2</sub> may; AD<sub>1</sub>, causing; recessionary C) AD<sub>1</sub> may; AD<sub>2</sub>, closing; recessionary D) AD<sub>1</sub> will; left, closing; recessionary
-(Figure: Monetary Policy I) Look at the figure Monetary Policy I. If the economy is initially in equilibrium at E1 and the central bank chooses to sell Treasury bills, _____ shift to the _____ a(n) _____ gap.


A) AD2 will; right, causing; inflationary
B) AD2 may; AD1, causing; recessionary
C) AD1 may; AD2, closing; recessionary
D) AD1 will; left, closing; recessionary

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