Concept: Monetary Policy Data TableQuestion Help

Consider the followingtable:

Year Potential GDP Real GDP Price Level

2012 $14.7 trillion $14.7 trillion 110

2013 $15.3 trillion $15.4 trillion 114

What can we expect from the Federal Reserve Bank if it seeks to move the economy in the direction oflong-run macroeconomicequilibrium?

A.

The Fed will pursue a contractionary

acontractionary monetary policy.

B.

The Fed will pursue an expansionary

anexpansionary fiscal policy.

C.

The Fed will pursue a contractionary

acontractionary fiscal policy.

D.

The Fed will pursue an expansionary

anexpansionary monetary policy.

If theFed's policy issuccessful, what is the effect on the followingindicators?

Actual realGDP:

Potential realGDP:

Pricelevel:

Unemployment: