answer clearly...

The accompanying gures show an economy that begins in long-run equilibrium with money supply at $300 billion and real GDP equal to Y * at $1300 billion. The money demand curve is M'1 , the aggregate demand curve is ADO, the aggregate supply curve is A30, and the pn'ce level is equal to 100_ Assume that Y t is unaffected by changes in the nation's money supply (i.e_, there is no hysteresis). a. Suppose the central bank increases the money supply to $330 billion. What is the initial etTect of the central bank's action before any changes in the price level and real GDP occur? The central bank's action initially causes no change in the money demand curve and initially causes the money supply curve to shilt to M; _ The interest rate falls 10 1% b. Once the economy's shortan adjustments have occurred, what are the levels of real GDP, the price level, and the interest rate? Explain which curves are shining. and why. In the course of the economy's shortrun adjustments, the aggregate demand curve shins to AD1 and the aggregate supply curve does not shi'. since the change in part (a) causes an upward shilt in the AE curve '_ These changes cause the money demand EUWB t0 Shin ID MEI and cause _ 1 no change In the money supply curve Once the economy's shortrun adjustments have occurred, real GDP is $ 1300 billion, the price level is 100 , and the interest rate is 1 'l-tn. Interest Rate (as) Prlm Level M" M1 6' " S I S : . I3 . I I \\ \\' : \\ I R K I i.' \\ I 3% ................... ...m:....$ \\ '\\ I '5 2 2 .. .. ....:+\"~M? 1% .................... mm"... 'MD l 300 330 Quantity of Money {3 billion 5} I 1300 137"] Real GDP {5 billions]