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Terms in this set (40)

Which of the following explains expansionary monetary policy in the long run?

a. Expansionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real GDP. In the long run, as resource prices fall, the short-run aggregate supply curve shifts to the right as well, causing the economy to expand.
b. Expansionary monetary policy shifts aggregate demand to the left, moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real gross domestic product (GDP). In the long run, as resource prices fall, the short-run aggregate supply curve shifts to the right, bringing the economy back to a long-run equilibrium where no real changes to GDP have occurred.
c. Expansionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real GDP. In the long run, as resource prices rise, the short-run aggregate supply curve shifts to the left, bringing the economy back to a long-run equilibrium where no real changes to GDP have occurred.
d. Expansionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real GDP. In the long run, as resource prices rise, the aggregate demand curve shifts back to the left, bringing the economy back to a long-run equilibrium where no real changes to GDP have occurred.
e. Expansionary monetary policy shifts aggregate demand to the left, moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real GDP. In the long run, as resource prices rise, the short-run aggregate supply curve shifts to the left, causing the economy to contract.